The Honorable Max Baucus
Chairman
Committee on Finance
U.S. Senate
Washington, D.C. 20510

The Honorable Orrin Hatch
Ranking Member
Committee on Finance
U.S. Senate
Washington, D.C. 20510

Dear Chairman Baucus and Senator Hatch:

Never before has the need for legislation to grant states the authority to collect sales taxes on remote sales been greater.  The continued disparity between online retailers and Main Street businesses is shuttering stores and undermining state budgets.  Congress has the opportunity to level the playing field for all retailers this year by passing S. 1832, the “Marketplace Fairness Act.” 

Years ago, the Supreme Court ruled that state sales tax laws were too complex to require out-of-state sellers to collect sales taxes on catalog sales. As a result, states are unable to collect more than $23 billion in sales taxes owed annually from remote sales made through catalogs over the Internet. It also creates an artificial price disparity between goods bought from the corner store and those bought online.  It is in essence an unwarranted yet growing subsidy to Internet sellers at the expense of brick and mortar stores.

Failure to act now will only exacerbate state losses and harm local businesses that are losing sales to online sellers. According to a leading Internet analytics firm, 2012 holiday online sales are up 14 percent from last year. (Wall Street Journal, Real-Time Economics, Dec. 5, 2012.) Cyber Monday was the heaviest online spending day on record at $1.47 billion. The firm attributes the growth to broad strength in the e-commerce sector and the fact that more than half of those who use the Internet have already made an online purchase this holiday season.

The Marketplace Fairness Act restores fairness by providing states the authority to collect if they are willing to simplify their tax systems to make it easier to do business. It also provides protection to truly small businesses in your state through a small business exception.  This common sense approach will allow states to collect taxes they are owed, help businesses comply with different state laws, and provide fair competition between retailers that will benefit consumers and protect jobs.  Furthermore, passage of the bill will serve as the equivalent of a $23 billion stimulus to state and local governments helping to speed recovery and grow the economy.

Best of all, the Marketplace Fairness Act will accomplish these goals without raising taxes or increasing the federal debt. 

We understand that you would prefer to take up the Marketplace Fairness Act next year in the context of wide-ranging, comprehensive tax reform.  Frankly, our Main Street businesses and states cannot afford to wait.  This is our best chance to pass this important legislation and we urge your support for enacting S. 1832 this year.

Sincerely,

Governor Chris Gregoire
Washington

Governor Bill Haslam
Tennessee