Copyright 2000 Federal News Service, Inc.
Federal News Service
April 12, 2000, Wednesday
SECTION: PREPARED TESTIMONY
LENGTH: 1857 words
HEADLINE:
PREPARED TESTIMONY OF DAVID BULLINGTON VICE PRESIDENT OF TAXES, WAL-MART STORES,
INC.
BEFORE THE SENATE COMMERCE COMMITTEE
BODY:
Mr. Chairman, Senator Hollings, members
of the Committee, thank you for including a voice from the broader retail
community in today's hearing. Sound economic policy in a free enterprise economy
requires equal tax treatment of the different channels of retail distribution
The existing state rules, as constrained by Supreme Court decisions issued well
before file superhighway of technology was introduced, have created two fields
of retail competition. On one playing field, brick-and-mortar retail stores,
both small and large, are required to collect sales tax on behalf of states and
localities. On the other, the unenforceable rules applicable to remote sales do
nothing more than encourage consumers to voluntarily pay the use tax equivalent
of a sales tax. As we all know, the use tax is easily ignored. Only
across-the-board collection of this existing tax will level the playing field
and rationalize our tax policy.
We believe that it is now up to Congress
to resolve this issue fairly, so that all channels of retail distribution are
treated the same. Brick-and-mortar retailers are now at a competitive "pricing"
disadvantage became, unlike many of their Internet and
other remote selling counterparts, they must collect sales
taxes on most in-store sales. And, unless they take
drastic steps to separate their Internet business from their
brick-md-mortar business, they must collect sales taxes on
their own remote sales as well. We are greatly concerned about the effect the
existing tax structure if not fixed, will have on our communities. We share
everyone's concern with the tax burden issue, and in no way do we want my
additional tax burdens placed on consumers. Without across-the-board sales and
use tax collection, revenues will actually decrease, and many states will be
forced to raise sales tax rams or introduce tax increases in other areas, such
as property taxes, to offset the loss of sales tax revenue. In these
circumstances, states will have fewer taxing options and will, as a result, have
less control over their tax policy. Sales tax revenues are critical to the
funding of public services such as schools, roads, police, and fire protection.
Furthermore, customers who do not have access to the Internet-- often
lower income individuals, who can least afford the burden of
taxes- must pay sales taxes, while
Internet shoppers in most cases do not. Access aside, the issue
of credit availability is a much larger impediment to lower income individuals.
Wal-Mart and the International Mass Retail Association (IMRA) are among
the founding members of the e-Fairness Coalition--a coalition that advocates
fairness for businesses and consumers, md that supports a level playing field,
including fair and efficient collection of the existing tax already applied to
remote sales. The e-Fairness Coalition very firmly believes that Congress must
not extend the existing moratorium---which does not expire until October
2001--without resolving this sales tax collection issue.
Background
The issue of whether remote sellers should be required to
collect and remit sales taxes is certainly not new, but the
spectacular growth of the Internet and the opportunities for
increased sales flint most businesses see on the
Internet have refocused attention on the issue.
Deciding whether remote sellers should be required to collect
taxes rests with the Congress, under the U.S. Constitution's
Commerce Clause. The Supreme Court's 1992 decision in Quill Corporation v. North
Dakota held that the Constitution prevents states from requiring use tax
collection by out-ofstate sellers without a physical connection to the state,
but that Congress has the power to require such out-of-state sellers to collect
the taxes. As the Court pointed out, only Congress has the authority to regulate
interstate commerce. The best and most thoughtful course of action for Congress
would be to give those states that undertake specified simplification steps the
authority to require remote sellers to collect This would resolve any concerns
about burdening intern commerce and would put all retailers, at least in those
states that simplify, on a level playing field.
Simplification
We believe that Congress may fairly require Internet
and other remote sellers to collect and remit sales or use
taxes on all taxable business to consumer sales, and flint
simplification is the key. Much has been made of the thousands of different
taxing jurisdictions across the nation and of the other elements of state sales
taxes that add to the current complexity. And at present it is a complex
patchwork ofsystems that causes even the largest and most efficient retailers
great headaches. While technology has made tremendous progress, it is not yet by
itself a saver bullet that can entirely eliminate the burden of collecting.
Technology coupled with simplification is the answer.
We emphasize that
even with simplification, my across-the-board collection requirement must allow
for suitable de minimis times Ids below which Mom-and-Pop web sites and other
small businesses need only concern themselves with the filing requirements of
their home slate, as required by current law.
Recently there has been a
tremendous amount of discussion about sales and use tax simplification. While
there is by no means universal agreement on exactly how simplification should
proceed, there is broad agreement on a number of items that we believe should
make up the basis of Congressional legislation to provide collection authority
for states.
Simplification should include a cert d, one-stop,
multi-state registration system for sellers; uniform definitions for goods or
services that may be included in lie tax base; uniform and simple rules for
attributing actions to particular taxing jurisdictions; uniform rules for the
designation and identification of purchasers exempt from sales and use taxes,
including a database of all exempt entities md a rule ensuring that reliance on
such database shall immunize sellers from liability; uniform procedures for the
certification of software that sellers rely on to determine state and local me
tax rates md taxability; uniform bad debt rules; uniform tax returns and
remittance forms; consistent electronic filing and remittance methods; state
administration of all state and local sales taxes; uniform auditprocedures;
reasonable compensation for tax collection that reflects the complexity of an
individual state's tax structure including file structure of its local taxes; an
exemption from use tax collection requirements for sellers falling below a
specified de minimis threshold; appropriate protection for consumer privacy; and
any other features tint the states deem warranted to promote simplicity,
uniformity, neutrality, efficiency, and fairness. We believe tint many states
are willing to work together to implement these types of simplification.
To encourage simplification, Congress should give states the authority
to adopt a single state-wide use tax rate, which would be a blended rate of the
various state md local sales tax rates. Current Commerce Clause judicial
restrictions limit a state's ability to create a single blended rate applicable
only to remote sales.
Some in Congress are already working on
legislation to allow states to enter into an interstate compact to implement the
simplification described above.
This legislation would allow states that
join the compact and meet the simplification goals (upon certification by the
General Accounting Office) to require businesses selling into their state
(remote sales) to collect and remit the proper tax. We commend this effort to
the members of the committee. The compact arrangement removes from Congress the
decision of whether states impose and collect file tax and returns it to the
states, where sales tax administration properly belongs.
Consequences of Extending the Moratorium Without Addressing
Sales TaxesIf Congress extends the current Internet
tax moratorium without at the same lime approving legislation to
achieve a level playing field for all retailers, future resolution of the issue
will be seriously jeopardize. I don't know anyone who believes it will be any
easier to resolve the issue in five or six years. In fact, I can almost
guarantee you that it will be nearly impossible, because absent a solution, most
brick-andmortar businesses that also sell on the Internet will have been forced
to reorganize their corporate in order to remain price competitive. Companies
will, as Wal-Mart has already, restructure their Internet business as a separate
subsidiary with nexus in only a handful of states md collecting sales tax in
only those states. While Wal-Mart has taken this step for reasons in addition to
tax collection, I respectfully suggest that this is not the result Congress
should be seeking. Congress should not force businesses to alter their corporate
structure simply to remain price competitive.
Rather, Congress should
take this opportunity to level the playing field for sales tax collection. A
level playing field, where all retailers are treated equally with regard to tax
collection duties is the only rational policy available. Simply put, government
should not be meddling in the marketplace. By the status quo--extending the
moratorium without fixing the problem---Congress would be giving Internet and
other remote retailers a de facto tax subsidy, while at the same time making it
much more difficult to resolve the issue in the future. Internet retailers do
not need, nor should they be given, a tax preference. All retail businesses
should compete on the traditional bases of price, selection and service. Tax
preferences are bad tax policy and bad economic policy, and Congress must take
this opportunity to encourage and eventually allow the states to bring this
unintended lax subsidy to an end.Conclusion Senator McCain, you have long been a
champion of ending corporate welfare and closing down special interest
loopholes. Surely you cannot have intended to give a special tax subsidy to
Internet retailers. By all means, keep the Internet free from taxes on access
and do not let the Internet be burdened by special levies or regulations
targeted solely at the Internet. Just as there is no justification for singling
out the Internet for discriminatory treatment, there is no reason to perpetuate
a deficient, outdated system that gives Internet retailers preferential
treatment. Internet commerce will continue to flourish as more and more
brick-and-mortar retailers take advantage of it. It need not be propped up at
the expense of others.
IMRA is an alliance of retailers and their
product and service suppliers that is committed to bringing price-competitive
value to the world's consumers. IMRA represents over 200 retail companies, which
operate more than 133,000 stores worldwide and have sales of over
$450 billion annually, IMRA represents over 600 supplier
companies with sales totaling over $600 billion per year.
Together, IMRA's membership (missing text) over $1 trillion in
sales and employs millions of workers.
END
LOAD-DATE: April 13, 2000 
