Copyright 2000 eMediaMillWorks, Inc.
(f/k/a Federal
Document Clearing House, Inc.)
Federal Document Clearing House
Congressional Testimony
June 29, 2000, Thursday
SECTION: CAPITOL HILL HEARING TESTIMONY
LENGTH: 2574 words
HEADLINE:
TESTIMONY June 29, 2000 MR. ROBERT BENHAM OWNER BALLIET'S HOUSE
JUDICIARY COMMERCIAL AND ADMINISTRATIVE LAW INTERNET TAXES
BODY:
June 29, 2000 Mr. Robert Benham Owner,
Balliet's On Behalf of the National Retail Federation Before the House Judiciary
Committee Subcommittee on Commercial Administration and Law Good morning, Mr.
Chairman. My name is Bob Benham. I am the owner and operator of Balliet's, a
women's specialty store in Oklahoma City, Oklahoma. In 1999, Balliet's sales
were nearly $6,000,000, with a net profit of 1.9%, the stores best since the
banking bust and oil price collapse of the mid-1980's. Balliet's has been in
business since 1936 and employs 33 wonderful people, for whom we provide health
care and other employee benefits. Our payroll and benefit cost for 1999 was
$1,230,000. We collected $483,000 in sales taxes and paid
$11,200 in property taxes. Balliet's is a "bricks and clicks"
retailer, with a 14,200 square foot store and a 50-page web site
(www.balliets.com). We have embraced Internet technology while remaining firmly
grounded in the fundamental skills of retailing. I am testifying today on behalf
of the National Retail Federation, the world's largest retail trade association,
representing 1.4 million retail establishments that employ more than 22 million
Americans. I am immediate past chairman of the Independent Stores Board of
Directors of the National Retail Federation. I have been in retailing since 1966
obtaining experience with May Department Stores Company and Federated Department
Stores Company. I was president and CEO of Halls Merchandising Inc. for 15 years
before my family bought Balliet's in 1991. The growth of consumer shopping on
the Internet is expanding at a rapid rate. In 1999, 40 million Americans shopped
online, up from 17 million in 1998. The total of goods and services traded on
the Internet is expected to reach $300 billion by 2002. The Internet provides
retailers the opportunity to reach millions of people in markets never before
imagined and provides consumers instant access to information, products and
services from around the world. As this new medium evolves, so too should
government policy to ensure that no one is left behind, and that everyone
competes on a level playing field. In 1998, Congress enacted a moratorium on any
"new" Internet taxes until October 21, 2001, while creating a
special advisory commission, the Advisory Commission on Electronic Commerce
(ACEC), to address a host of Internet and remote commerce tax
issues in the interim. Unfortunately, most of this debate has ignored a broader
inequity that currently exists in the state sales and use tax
systems that disadvantages mainstreet retailers and low-income consumers. Both
the ACEC, as well as recent legislation passed by the House of Representatives
failed to address the broader state sales and use tax inequity
that exists today. Not only did the ACEC findings lack the supermajority
consensus mandated by Congress for approval of its recommendations; it did not
include a mainstreet retail representative, as was dictated in the original
statutory language. Like many other taxes, retailers oppose new
taxes on the Internet, including "bit" and/or "access"
taxes, and even the existing telephone "excise"
tax. However, the retail industry feels that Congress must also address
the broader more complicated state sales and use tax inequity
as well. Existing sales and use tax law creates an "unlevel
playing field" among retailers. Presently, 45 states and the District of
Columbia impose sales and use taxes on purchases of tangible
goods. Under current law, retailers are required by the states to collect these
taxes from a customer and immediately remit this sales
tax to the state. However, based on two Supreme Court rulings,
some out-of-state retailers (those without a physical presence in the
purchaser's state) are not required to collect and remit a state's sales and use
tax. In this case, the consumer still has the legal
responsibility to pay a "use" tax directly to his or her own
state. Since many Internet sites and remote sellers aren't located in a
purchaser's state, they do not have to collect these taxes.
Exempting some out-of-state sellers from having to collect sales and use
taxes creates an "unlevel playing field" among retailers.
Refusing to address the existing state sales and use tax
inequity in the same context as other Internet tax issues
ensures that an unlevel tax playing field will continue to
exist. If the current inequity is not addressed soon, resolution of this issue
could be deferred for years, with the result being continued erosion of the
state tax base and continued discriminatory
tax treatment that disadvantages storefront retailers and
low-income consumers. Retailers want a "level playing field" - where a product
is taxed (or not taxed) the same regardless of how it is ordered or delivered.
All retailers, regardless of the channel or channels in which they do business,
should have the same collection responsibilities - no matter if the transaction
is made in a traditional store, through a traditional store's own website, by a
strict e-commerce retailer or through any other type of remote seller.
Government tax policy shouldn't determine the winners and
losers. In the retail industry, where a 1-2% net profit margin is standard, a
6-8% tax differential (the average state sales and use
tax rate) is a significant pricing advantage. Why would someone
buy something in a store when they could log onto the Internet and buy it for 8%
less? Consumers should pick winners and losers based on factors that they decide
are important such as selection, service, convenience, etc. Tax
policy shouldn't provide one retailer a pricing advantage over another. A "level
playing field" does not mean a new tax - consumers are already
required to pay "use" taxes. Under current law, if sales
tax is not paid on an out-of-state purchase at the time of
sale, the purchaser is required by state law to pay a comparable "use"
tax to his or her state, usually when they file their state
income tax return. Historically, states have not enforced
collection of "use" taxes, but they do exist. State and local
government services will suffer as their revenue base decreases. On average,
sales and use taxes account for approximately 40% of a state's
total tax revenue (more than $150 billion in 1998). With
projections of on-line sales estimated to exceed $300 billion by 2002, state and
local governments could lose as much as $20 billion in uncollected sales
tax. Sales tax revenue is used to fund basic
state and local governmental services including police and fire protection,
school funding, and road construction and maintenance. An "unlevel playing
field" disproportionately hurts the poor. In 1998, 55 million people had access
to the Internet. According to a recent Commerce Department study, affluent
individuals are 20 times more likely to have Internet access. With an average
Internet household income of $70,000, an "unlevel tax playing
field" would benefit those with higher levels of income and shift the
tax burden to lower income individuals who can buy only locally
(and thus pay sales tax at the sales counter). Opponents of
sales tax equity argue that collecting sales and use
taxes will retard the growth of the Internet. Considering the
recent rate of growth of the Internet, it's clear that Internet retailers need
no special tax advantage. Those companies simply seek to retain
an unfair competitive advantage. Why do dot coms fail? Some for the same reasons
that main street retailers fail: poorly conceived strategies, inept management,
flawed execution Tax equity opponents also maintain that the
Internet is "the driving force of the new economy." Wrong. The driving force of
the new economy is the American free enterprise system, just as it has always
been. The net is just the latest manifestation of American innovation and
competitive drive. Retail businesses of all types - Internet, catalog,
storefront - should succeed or fail in an open, fair competition on the field of
combat, not because Congress chooses winners and losers. Mainstreet retailers
are part of the fabric of our communities, sponsoring Little League teams,
buying tables at local charity events, giving door prizes to non-profits,
holding fashion shows for worthy organizations. In 1999 alone, Balliet's, at our
cost, produced 5 fashion shows that helped local charities raise over $200,000.
In addition, we donated over $7,000 in cash and merchandise to various worthy
causes. That's nearly 10% of our net profit Mainstreet retailers are angry about
the unfair competitive advantage given to catalog and Internet retailers. We are
concerned about the growing erosion of the sales tax base in
the communities where we live, work and raise our families. It's time for
Congress to restore basic tax fairness to all retailers. In
summary, we ask for no new taxes on the Internet,
tax equity for all forms of retail trade, and
tax simplification. Congress has a responsibility to my
business, my employees and my community to eliminate this existing
tax inequity. On behalf of the National Retail Federation and
small and independent retailers who believe in the American dream of equality
under the law, open and fair competition and the right to succeed or fail on our
own merits, we thank you Mr. Chairman.
LOAD-DATE: July
11, 2000, Tuesday 
