By: From the Hill to the Mountains: A weekly column by U.S. Senator Joe Manchin (D-W.Va.)
April 29, 2013
The Senate is considering legislation that is vital to the livelihood of the retailers you do business with almost every day. It’s called the Marketplace Fairness Act, and I am proud to support this proposal because it is a matter of fairness to the business owners in your hometown.
This piece of legislation is just 11 pages long – pretty short compared to most of the bills we see in the Senate. And it has broad bipartisan support, much more than we typically receive. Three-fourths of the Senate voted to begin debate on it.
The bipartisan support isn’t confined to Washington. Twenty-eight governors – 16 Republicans, 11 Democrats and 1 Independent – support it.
In West Virginia, it has overwhelming support. One West Virginian contacted my office this week complaining that without this legislation, store owners will continue to face “fundamentally unfair” competition from online retailers.
It also has the backing of some of our biggest online retailers, including Amazon.
Basically, the Marketplace Fairness Act allows states to collect sales tax for out-of-state sales provided those states streamline their tax codes under conditions spelled out in the bill.
Some critics say this is a new tax. Wrong.
This bill does not create one penny in new taxes. It simply allows states to require merchants who sell products online or across state lines to collect taxes on sales to customers in that state – just like the brick-and-mortar stores do right now.
Other critics say online services don’t use the local services that are paid for by sales taxes so they shouldn’t be required to collect the sales tax. Wrong again.
The product you ordered online was delivered to your door, using airports and roads and other infrastructure paid for with state tax dollars.
Still other critics say this bill will burden small businesses. And wrong again.
Small shops and vendors with less that $1 million in out-of-state sales are completely excluded from the bill.
The fact is that brick-and-mortar and online retailers sell identical products and use the same infrastructure to deliver their products. And collecting taxes that are owed on a purchase at the point-of-sale rather than relying on consumers to pay that tax voluntarily – as some critics have proposed – would mean $23 billion per year in badly needed revenues for the states.
If West Virginia could have collected sales tax on out-of-state sales during fiscal year 2012—not new taxes, just those already owed to the state –that would have put $103.2 million more in the state’s budget.
And with that additional money, our great state could do a number of things for our people – and do it every year. With $103.2 million, we could build a 412 mile two-lane paved road; hire 2,000 school teachers; build 5 high schools; build 7 middle schools; or build 10 elementary schools.
And judging by the way e-commerce is expanding, the bill will mean even more revenue for states in the future.
In 2000, the U.S. economy supported $27.6 billion in e-commerce, which constituted only 0.9% of all retail sales. Over the next 12 years, e-commerce grew ten-fold, totaling $224 billion in 2012, which is equal to 6.9% of all retail sales.
One market analysis projects that online retail sales in the United States will grow by 10 percent annually through 2017, from $224 billion in 2012 to $370 billion over the next four years.
We should celebrate and encourage this growth in e-commerce, but we also should recognize that our laws must be updated to account for changes in our economy.
I believe the Marketplace Fairness Act is an important first step because it does so much. It restores fairness and balance to our tax system, strengthens our businesses, revitalizes our downtowns, creates jobs, and helps states struggling to provide the services their citizens expect.