May 1, 2013 I wanted to thank you for sharing your concerns about the Marketplace Fairness Act with Senator Flake.
Senator Flake recognizes that the Marketplace Fairness Act has broad implications and believes it should be fully vetted by the Senate Finance Committee, which has jurisdiction over this issue. He supports a thorough debate of this issue, which is why he supported the motion to proceed to the bill. Unfortunately, an open amendment process has not followed, so amendments aimed at addressing Members’ concerns and improving the bill have not been allowed. Pushing this bill through without committee consideration or amendments by the full Senate is unnecessary, especially given that the House is proceeding slowly and has not yet marked up the bill.
You mentioned several concerns, some of which Senator Flake shares. While the bill attempts to make compliance easier by requiring each state to provide businesses with tax software, businesses will still have to pay the compliance costs of integrating the tax software with their own systems, as well as with the tax software of any other state in which they do business. With reportedly over 9,000 taxing jurisdictions across the country, states will have to produce, and frequently update, software that correctly calculates the rates of numerous jurisdictions within the state that have varying rules of what is and what is not taxed. There is also concern that opening the door to audits and other enforcement actions on remote retailers by 50 states and hundreds of tribal organizations could be overly burdensome, as well as violate the due process clause. In particular, internet retailers that sell even one product into a state could be subject to audits and collections from that state for which they have no presence.
In addition, there is also debate about what an appropriate small seller exception should be. The Senate bill proposes a $1 million revenue cap. Some suggest this amount is too low, while others debate whether an exception is needed at all. This would incent businesses to NOT grow past the $999,000 revenue cap. Raising the cap simply changes the incentives, but still doesn’t change behavior. If this bill is designed to promote “fairness,” the idea of an exemption needs to be more thoroughly vetted. This is an area where committee consideration could be constructive.
Thank you again for sharing your thoughts with the Senator.
Kristen Fallon Legislative Assistant Senator Jeff Flake (R-AZ) B-85 Russell Senate Office Building (202) 224-4521