CONYERS: Statement for the Hearing on H.R. 2887, the No Regulation Without Representation Act of 2017

Dean of the U.S. House
of Representatives
John Conyers, Jr.

Before I begin my remarks, I’d like to take a moment to recognize Joseph Ehrenkrantz for his dedicated service to the House of Representatives.

Over the past two years, he has diligently served the House Judiciary Committee as a Professional Staff Member.

Joe began his career with the House Judiciary Committee Democrats shortly after graduation, and has worked tirelessly on issues of civil rights, state and local taxation, and voting rights ever since.

Joe has served the Members and staff of the Committee with great energy and enthusiasm, working to ensure the smooth functioning of Committee business by coordinating briefings, staffing hearings, and clerking markups.

We thank Joe for his many outstanding contributions to the House Judiciary Committee and the U.S. House of Representatives, and wish him well as he begins law school at Georgetown University this fall.

He will surely be missed.

Turning to today’s hearing, which focuses on H.R. 2887, the “No Regulation Without Representation Act of 2017,” it appears that supporters of this legislation intend to address the apparent problem of states regulating beyond their borders.

Twenty-five years ago, the Supreme Court in Quill held that a state may require a business to remit a sales tax only if such business had a physical presence in the state where the goods or services are provided. 

In an effort to respond to this holding, various legislative responses have been introduced over the years, including two of which I strongly supported, namely, The Remote Transactions Parity Act and the Marketplace Fairness Act. 

Although one of these bipartisan measures overwhelmingly passed the Senate in 2013, our Committee has unfortunately failed to consider either of these bills. 

Instead, we are focusing today on H.R. 2887, a highly-flawed measure. 

Among its many flaws, this bill would eviscerate the 10^th Amendment and override the powers of all 50 states by expanding the physical presence standard to all taxes and all regulations.

H.R. 2887 represents an extreme rethinking of the constitutional role of states in our Nation and would strip essential consumer protection powers and taxing authority from all 50 states.

To quote the bipartisan National Governors Association and the National Conference of State Legislatures, this legislation “is a direct threat to representative self-government.”

Simply put, H.R. 2887 would preempt tens of thousands of state laws and saddle these states with untenable budget constraints by reducing their ability to collect tax revenues.

Second, this bill appears to ignore the real problems that main street retailers face today.

Local retailers—that have to collect sales taxes—are desperately struggling to compete with the reduced prices and conveniences offered by remote Internet sellers, whose online prices are generally lower because many consumers do not pay any sales taxes and thereby can save upwards of 10% or more on the purchase price of these items.

Technological advancements have made it easier for consumers to take advantage of this disparity and the consequences of this loophole are becoming increasingly more apparent.

Since October, at least 10 major, nationwide brick and mortar retailers have filed for bankruptcy and more than 90,000 workers have been laid off. 

Retail sector growth is at its weakest since the Great Recession, and recent projections estimate that a quarter of all U.S. shopping malls will close in the next five years.

Without question, I am a strong supporter of competition, especially when it benefits consumers and encourages innovation. Nevertheless, competitors should compete on things other than sales tax policy.

We should ensure parity at the point of sale among retailers and level the playing field.

Finally, H.R. 2887, by codifying Quill, would effectively prevent states and local governments from accessing a substantial part of their tax base.

State governments rely on sales and use taxes for nearly one third of their total tax revenue. Yet, as more Americans purchase more of their goods on the internet, the states receive less in sales tax revenue.

We owe it to our local communities and local retailers, as well as state and local governments, to take up helpful legislation rather than considering such flawed measures as H.R. 2887.  Accordingly, I urge Committee Chairman Goodlatte and Subcommittee Chairman Marino to instead consider H.R. 2193, the “Remote Transaction Parity Act,” bipartisan legislation introduced by Representative Kristi Noem earlier this year.

In closing, I look forward to hearing the testimony from our witnesses today and yield back the balance of my time.

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CONYERS Statement on H.R. 1393, the "Mobile Workforce State Income Tax Simplification Act of 2017"

Dean of the U.S. House
of Representatives
John Conyers, Jr.

H.R. 1393, the “Mobile Workforce State Income Tax Simplification Act,” helps to clarify various record-keeping and state income tax liability issues.  Nevertheless, the bill requires further revision before I can support it.

On the positive side, H.R. 1393 attempts to solve a legitimate problem presented by employee tax liability and employer withholding requirements.

Many employers are subject to multiple tax compliance record-keeping requirements for their mobile workers. 

These workers, in turn, are often subject to potentially conflicting and thereby confusing multiple state income tax requirements.

The paperwork that both employers and workers must file can be complicated and time-consuming.

And the filings, especially for sometimes miniscule amounts of income, can even be burdensome to state revenue departments.

Unfortunately, H.R. 1393, if enacted, could result in some states losing millions of dollars in revenue.

In fact, New York could lose upwards of $100 million in revenue.

Fortunately, this legislation only needs some simple changes to eliminate these negative impacts. 

For example, the bill currently has a 30-day threshold before an employee would be required to pay income taxes in a state. A much lower threshold would be fairer to the states and still provide certainty to employers and employees.

In addition, the bill’s timekeeping requirements could be tightened to help prevent tax avoidance.

A solution appears to potentially close and, accordingly, I look forward to working with my colleagues and the various stakeholders to finally achieve this goal.

I would be remiss if I did not take this opportunity to urge my colleagues to pass a fair and uniform framework to allow states to collect taxes owed on remote sales, rather than proceed with this flawed bill.

By staying silent since the Supreme Court’s 1992 Quill decision, Congress has failed to ensure that states have the authority to collect the sales and use tax on internet purchases.

While this decision may have made sense in 1992, it does not stand up well over time. In 2015 alone $26 billion dollars owed to states went uncollected.

Lost tax revenues mean that state and local governments will have fewer resources to provide their residents essential services, such as education and health care.

This Congress, House Republicans are advancing both TrumpCare and a disastrous budget that would both cut untold amounts of federal assistance to the states.

In light of these looming funding cuts, the loss of billions of dollars in state revenue is more pressing than ever.  This committee should move swiftly to close the internet tax loophole by passing legislation this Congress.

I thank the Chairman and yield back the balance of my time.

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REP. CONYERS CALLS FOR MORATORIUM ON PROPERTY TAX FORECLOSURES IN WAYNE COUNTY

DETROIT— Today, Congressman John Conyers, Jr. (MI-13) released the following statement urging a moratorium on property tax foreclosures and improved access to services for Detroiters facing today’s deadline:

“Today is the final day for anyone facing property tax foreclosure to get assistance.  I urge any Detroiter who thinks they might be facing foreclosure by Wayne County to visit the Wayne County Treasurer’s office at 400 Monroe Street in Detroit, call 313-224-5990 or email at taxinfo@waynecounty.com.  For more complex issues with property tax foreclosures, call the United Community Housing Coalition at 313-963-3310, or their emergency number at 313-405-7726.  Today may be your last chance.”

Dean of teh U.S. House
of Representatives
John Conyers, Jr.

“I remain gravely concerned over the fate of the tens of thousands of Wayne County residents that could lose their homes to property tax foreclosure.  While I greatly appreciate the hard work done by the Wayne County Treasurer’s office to keep people in their homes, including providing an extension, additional time is needed to protect our residents from being kicked out of their homes.  Detroiters already suffered through a foreclosure crisis caused by the discriminatory lending policies and incompetence of our nation’s biggest lending institutions.  We cannot tolerate another round of foreclosures and evictions – much less one carried out by our local government that has a duty to serve our citizens.”

“Despite the economic hardship faced by many Detroit families, too many Detroit homeowners are being obligated to pay taxes when they are eligible for a statutorily-mandated poverty exemption.  Furthermore, the City of Detroit has not carried out its duty under Michigan’s Constitution (Art.  IX, § 3.)  to assess the actual value of properties on an annual basis.  The failure of local authorities to fulfill these two legal requirements means that many homeowners owe inaccurate and unreasonable amounts in property taxes—in some cases, the owed taxes exceed the actual value of the home.”

“Finally, foreclosing on occupied homes actually hinders the goal of raising revenue.  Selling these homes at auction only gathers a tiny fraction of the revenues owed in taxes, while the eviction of families from their homes increases blight, depresses surrounding property values, and destabilizes neighborhoods.  For these reasons, I strongly urge Wayne County Treasurer Raymond Wojtowicz to immediately implement a moratorium on property tax foreclosures until there is an appropriate remedy for these families and our community.”

# # #

As of last month, 31,000 properties were facing property tax foreclosure in Wayne County, and about 9,000 of those properties are occupied, according to Wayne County Chief Deputy Treasurer David Szymanski.  Detroit’s Loveland Technologies estimated that, of the 58,000 blighted properties in Detroit, 50,000 of them were impacted by tax foreclosure.  An investigation by The Detroit News into area home sales and property value assessments found homes that were sold for under $100 were valued by local authorities at nearly $46,000.

On May 27, Congressman Conyers hosted a tele-town hall on the property tax foreclosure crisis featuring representatives of the County Treasurer’s office and other legal assistance organizations, in which over 8,600 Wayne County residents participated.

Those facing property tax foreclosure are urged to immediately seek help by visiting the County Treasurer’s Office at 400 Monroe Street in Detroit, calling 313-224-5990 or emailing taxinfo@waynecounty.com.  For more complex issues with property tax foreclosures, residents can call the United Community Housing Coalition at 313-963-3310, or their emergency number at 313-405-7726.

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Ranking Member Conyers Statement at Markup of the Permanent Internet Tax Freedom Act

(WASHINGTON) – Today, the U.S. House Judiciary Committee held a full committee Markup of H.R. 3086, the “Permanent Internet Tax Freedom Act,” and H.R. 4874, the “Search for and Cutting Regulations that are Unnecessarily Burdensome (SCRUB) Act of 2014.” During his opening remarks on H.R. 3086, Ranking Members John Conyers, Jr. (D-Mich.) delivered the following statement:

U.S. Representative
John Conyers, Jr.

“H.R. 3086, the ‘Permanent Internet Tax Freedom Act,’ addresses the impending expiration of the Internet Tax Freedom Act. Enacted in 1998, ITFA was intended to be a temporary moratorium to nurture the Internet in its infancy.  It did so by prohibiting multiple and discriminatory taxation of the Internet as well new taxes on Internet access. Although Congress has extended this moratorium on 3 prior occasions, it is now due to expire in November of this year.

“As we consider this legislation, there are several points that we should keep in mind. To begin with, today’s Internet is very different than the Internet of 1998, and the reasons that initially warranted a moratorium simply no longer apply. Today’s Internet has gone mainstream.  It has provided a platform for innovation, created entirely new industries, and improved countless services. It is no longer primarily accessed through a dial-up service from a few providers. Instead most Americans have several options from cable to DSL to fiber optics, from satellite services to wireless services. The Internet is no longer a nascent idea in need of federal tax protection to grow.  It is now a prosperous sector of the global economy.

“Yet, in those states that were exempted under the ITFA’s grandfather clause and allowed to continue to tax Internet access, studies show that there is no difference in the rates of household Internet access between states that tax Internet access and those states that do not tax Internet access. In other words, there is no evidence that making ITFA permanent will encourage people who do not currently subscribe to high-speed Internet access services to begin doing so.

“In addition, legislation concerning state taxation must take into consideration the needs of all affected stakeholders. Specifically, Congress must be mindful of any legislation that may adversely impact state revenues and thereby impede the ability of these states to provide needed services to their residents. Unfortunately, H.R. 3086, if enacted as is, will result in some states losing millions of dollars in revenue. For example, Texas and its localities could lose upwards of $350 million in revenue a year.

“Fortunately, this legislation only needs two simple revisions to eliminate these negative impacts –  the moratorium should not be made permanent; and the grandfather protections should be extended for the term of the moratorium. That is why I intend to offer an amendment that will make these two important changes to the bill. If these changes are not made and Congress chooses instead to protect an entire economic sector from taxation, the bill’s adverse impact on state revenues will likely shift the tax burden to lower income and rural consumers who continue to rely on telephone services. Utility companies, retailers, manufacturers, and other non-broadband related businesses may also feel the brunt of the tax shift.

“Finally, our Committee should focus on meaningful ways to help state and local governments as well as local businesses, such as the Marketplace Fairness Act, which the Senate overwhelming passed more than 13 months ago. By failing to address the issue of remote sales taxation, our local retailers – who have to collect sales taxes – are increasingly losing to out-of-state businesses that do not collect these taxes. Retail competitors should be able to compete on a level playing field with their Internet counterparts at least with respect to sales tax policy.

“Not only do local retailers suffer because of the disparate treatment of remote sales taxes, but state and local government suffer as a result of reduced tax revenues. Lost tax revenues mean that state and local governments will have fewer resources to provide their residents essential services, like education and police and fire protection. Accordingly, I urge the Chairman to schedule a markup before the August work period of the Marketplace Fairness Act or a similar effective measure. We owe it to our local communities, our local retailers, and state and local governments to act before the end of this year.”

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On Tax Day, Conyers Calls for a Fairer Tax Code for America’s Working Families

(DETROIT) – Today, on Tax Day, Congressman John Conyers, Jr. (D-Mich.) called on Congress to restore fairness to the nation’s tax code by reducing rates for working Americans, ensuring that the nation’s wealthiest pay their fair share, and eliminating incentives for corporations to move jobs overseas. On the filing deadline, Representative Conyers issued the following statement:

U.S. Representative
John Conyers, Jr.

“For too long, our tax code has disproportionately benefited the wealthiest one-percent of Americans, while doing too little to promote job-creation. On this Tax Day, I urge my colleagues in Congress to close tax loopholes, end special interest tax breaks, and reform the tax code to support the creation and retention of high-wage jobs in the United States," said Conyers.

“Instead of promoting a fairer and simpler tax code, the Republicans’ Ryan budget threatens to increase taxes on working families with children by more than $2,000 per year in order to pay for additional tax cuts for the wealthiest Americans and for large corporations. As a matter of social and economic fairness, this is simply unacceptable.

“I am proud to support the Congressional Progressive Caucus budget, which would create needed revenue for jobs programs by taxing income from investments the same as taxes from wages, while ending deductions for yachts, corporate jets, and business entertainment expenses. I am also proud of President Obama’s legacy in cutting taxes for working people and small businesses while allowing the fiscally-irresponsible Bush tax cuts to expire. By closing loopholes to ensure that corporations pay their fair share and stop shipping jobs overseas, we can responsibly invest in modernizing our infrastructure, ensuring that every child has access to high-quality pre-school, and strengthening our nation’s safety net. A fair tax code can help America get back to full employment.”

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Sales Tax Slice: How Much Revenue Do States (Really) Lose From Remote Sales?

"Lost tax revenues mean the state and local governments will have fewer resources to provide their residents essential services, like education and police and fire protection,” said House Judiciary Committee ranking member Rep. John Conyers (D-Mich.) at the hearing.  He said the Michigan Department of Treasury estimates Michigan loss of revenue from remote sales will total $290 million this fiscal year.
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Ranking Member Conyers Statement at Online Sales Tax Hearing

(WASHINGTON) – Today, the U.S. House Judiciary Committee held a full committee hearing entitled, “Exploring Alternative Solutions on the Internet Sales Tax Issue.” During his opening remarks, Ranking Member John Conyers, Jr. (D-Mich.) issued the following statement:

U.S. Representative
JohnConyers,Jr.

"Since the Supreme Court’s 1992 Quill decision, Congress has considered various legislative responses. These include the Main Street Fairness Act and the Marketplace Fairness Act, which the Senate overwhelmingly passed last May. But today’s hearing focuses on alternatives to those prior legislative initiatives. And, I welcome the discussion on these ideas,” said Conyers.

“As we consider how to best address the remote sales tax issue, however, there are several factors that we should keep in mind. To begin with, local retailers - who have to collect sales taxes - are increasingly losing their competitive advantage over out-of-state businesses, with each day that passes. Technological advancements have made it easier for consumers to take advantage of this disparity. For example, a consumer can walk into a local store, check the price of an item, ask the salesperson a few questions, and then use a smartphone to find an overall lower price online. The online price is generally lower because many consumers do not pay any sales tax online, sometimes saving more than 10% of the overall price of the item. This gives out-of-state retailers a clear advantage. They can charge the same basic pre-tax price as a local retailer for a laptop computer or a pair of designer shoes, but the price the consumer actually pays is lower because the retailers do not collect a sales tax. This helps explain why the percentage of online sales and the total amount of online sales continue to increase.

“I am a strong supporter of competition, especially when it benefits consumers and encourages innovation. Nevertheless, competitors should compete on things other than sales tax policy. We should ensure competitive equity among retailers and level the playing field.

“Second, not only does the local retailer suffer because of the disparate treatment of remote sales tax, but state and local governments - and the communities they assist - suffer as a result of reduced tax revenues. State governments rely on sales and use taxes for nearly one third of their total tax revenue. Yet, as more Americans purchase more of their goods on the Internet, the states receive less in sales tax revenue. For example, the Michigan Department of Treasury estimates that total revenue lost to remote sales will total $290 million this fiscal year. Lost tax revenues mean that state and local governments will have fewer resources to provide their residents essential services, like education and police and fire protection.  It also means fewer funds to pay for basic necessities, like salt to melt the ice and snow, and asphalt to fill the potholes. States may instead be forced to replace the erosion of sales taxes by increasing taxes in other areas, something many would surely oppose. Uncollected sales taxes also have a negative impact on local communities. Fewer purchases at local retailers translate to fewer local jobs and eventually the closing of stores. The unfair advantage that remote sellers have by not collecting sales taxes, hurts us all.

“Finally, Congress should not delay any further. In its 1992 Quill decision, the Supreme Court recognized that Congress is best suited to determine whether a remote seller must collect sales taxes. Congress has yet to make that critical determination. We owe it to our local communities, our local retailers, and state and local governments to act before the end of this year.

“I am pleased that today’s hearing provides us the opportunity to take that next step toward resolving this issue. Although I would prefer to markup the Senate-passed Marketplace Fairness Act and to consider  amendments to further improve it, I welcome the opportunity to hear workable alternative proposals. This issue is a prime opportunity for all of us to work in a bipartisan basis on legislation. But, it is imperative that we do so this year.

“Again I thank Chairman Goodlatte for holding this hearing today. I stand ready to work with him and any other Member to move legislation this Congress. But we should not delay any further.”

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On Tax Day, Conyers Calls for a Fairer Tax Code

(WASHINGTON) – On Tax Day, Congressman John Conyers, Jr. (D-Mich.) released this statement calling on Congress to take steps to reform the U.S. tax code in a fair and equitable manner:

U.S. Representative
John Conyers, Jr.

“Tax Day is a reminds us that, for far too long, the tax code has unfairly benefited the wealthiest in our country at the expense of working and middle class families,” said Conyers.

“Last year, I authored a white paper with my colleagues in the Congressional Progressive Caucus that outlines a vision of progressive comprehensive tax reform. A progressive tax code should invest in the economic future of the United States, promote responsible corporate behavior, limit outsourcing, improve progressivity, include fair rates for the wealthiest taxpayers, reexamine expenditures that benefit the wealthy, and protect benefits that help working families, the poor, and seniors.

“President Obama and Congressional Democrats have consistently sought to ensure fairness in our tax code through reforms that close tax loopholes for corporations and the wealthiest Americans.  I look forward to working with my colleagues in Congress in the coming year to pursue tax reforms that reflect our nation’s commitment to fairness and shared economic opportunity. A fairer tax code could include a tax on speculative financial transactions, new tax brackets for the super-wealthy, a carbon tax, and closing the carried interest loophole.”

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The Congressional Progressive Caucus’s Progressive Principles for Tax Reform can be found online here.

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Conyers: Trickle-Down Economics Inspired “Small Business” Tax Cut a Giveaway to the Wealthy That Does Not Create Jobs

WASHINGTON) – Representative John Conyers, Jr. (D-Mich.) released this statement following the House’s passage of H.R. 9, the “Small Business Tax Cut Act”, a trickle-down economics inspired tax giveaway to the wealthy that does little to spur small business growth or create jobs.     

U.S. Representative
John Conyers, Jr.

“Disguised as a small business tax cut, H.R. 9 is yet another attempt by the Republican Majority to create a new windfall tax break for the wealthy.  H.R. 9 is a fiscally irresponsible $46 billion tax gimmick which will increase the deficit and not guarantee any new domestic job creation or economic growth. This bill does not provide any incentive for employers to create jobs in the United States, and therefore will have no meaningful impact on our economy.  In fact, this bill still provides the tax break to companies that outsource the jobs of American workers.

“Congress should be passing measures such as infrastructure spending, which have a lasting impact on the economy.  Instead, the Republicans push H.R. 9, which according to the nonpolitical Joint Committee on Taxation, has an impact on the economy ‘so small as to be incalculable.’  There are far more effective ways to encourage job creation and economic growth than found in H.R. 9.  Last year, the Congressional Budget Office analyzed more than a dozen policy proposals for their impact on economic growth and job creation based on their budgetary costs.  It concluded that the policy reflected in H.R. 9 ranked next to dead last.  For $46 billion, the American people expect more than one new job for every $1.1 million in tax cuts in this wealthy business tax cut bill.

“The Republicans claim that H.R. 9 will help small businesses.  But instead of targeting those small businesses which could truly use a tax break, the Republicans have chosen to define a ‘small’ business simply by its number of employees rather than by any other descriptor.  Such a broad definition will include 99.6% of all American businesses, including those so-called ‘small businesses’ owned or managed by multimillionaire hedge fund and private equity managers, law firms and lobbyists, owners of sports teams, and companies which ship jobs overseas.  In fact, only 16 percent of the tax cut would benefit the 76 percent of small business employers making less than $200,000, while nearly half of the tax cut would benefit business owners with incomes exceeding $1 million.

“H.R. 9 is an ineffective proposal to maximize benefits for those small businesses – the local restaurants and mom-and-pop shop owners on Main Street – which create jobs and have a vested interest in our local communities.

“Bruce Bartlett, a former advisor to Presidents Reagan and George H.W. Bush, said it best when he wrote recently that H.R. 9 ‘will do nothing whatsoever to increase employment.  It is nothing more than an election year giveaway to a favored Republican constituency and should not be taken seriously.’  I could not agree more. 

“H.R. 9 is simply a handout of taxpayer money to the wealthiest Americans at the expense of the middle class.”

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Same Old Republican Tricks: No to the Buffet Rule, Another Yes to Voucherizing Medicare and Taxing the Poor

Same Old Republican Tricks: No to the Buffet Rule, Another Yes to Voucherizing Medicare and Taxing the Poor

(WASHINGTON) – Today, Republicans in the United States Senate voted to kill S. 2230, “Paying A Fair Share Act of 2012” –  legislation popularly known as the “Buffet Rule” –  that would reduce the deficit and restore fairness to America’s tax system.  Proposed by President Obama, the Buffet Rule would close tax loopholes so that those earning over $1 million in income pay a minimum tax rate just like the rest of America’s workers.  Senate Democrats sought to bring the president’s proposal to a vote.  But Senate Republicans acted to obstruct consideration of the bill by voting against limiting debate, denying the measure an up or down vote.  U.S. Representative John Conyers, Jr. (D-Mich.) – a cosponsor of H.R. 3903, the House Democrats’ version of the bill – released the following statement in response to Senate Republicans’ action:  

“Today, Republicans in the Senate once again proved they will oppose any attempt, however reasonable, at restoring fairness to America’s tax system,” said Conyers.  “Rather than support a balanced approach to deficit reduction that preserves programs critical to our Nation’s most vulnerable, Senate Republicans defend tax laws beneficial only to a wealthy few.  And Republicans here in the House are no better.

“Instead of acting to close tax loopholes to make sure that all Americans pay their fair share, the Republican leadership in the House has scheduled yet another vote on the Ryan Budget, a draconian piece of legislation that slashes Medicare, Medicaid, and puts the burden of deficit reduction on the backs of America’s working families.  This approach to deficit reduction is unfair and the American people know it.  According to a recent CNN/ORC International poll, 72 percent of Americans support enacting the Buffet Rule. 

    

“House Republicans need to heed the American people, abandon the slash-and-burn approach to deficit reduction embodied in the Ryan Budget, and support President Obama’s efforts to restore tax fairness through the Buffet Rule.”  

     

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Amazon Executive Says Congress Should Address Online Taxes

(Updates with additional testimony starting in second paragraph.)

Nov. 30 (Bloomberg) -- Paul Misener, Amazon.com’s vice president for global public policy, urged Congress to set standards for collecting state sales taxes from online commerce. Any exceptions to the tax should be kept “very low” for fairness reasons, Misener said.

Misener spoke today at a House Judiciary Committee hearing. Seattle-based Amazon, the largest online retailer, has long battled attempts by states to levy sales taxes on Internet transactions. Now it’s backing efforts to create a federal standard for states to collect sales tax on online purchases.

A 1992 U.S. Supreme Court decision exempted businesses from collecting sales taxes in states in which they don’t have a physical presence, or “nexus,” such as a store or warehouse.

That ruling has given Internet-based sellers an edge in the marketplace over brick-and-mortar retailers, said Representative John Conyers of Michigan, the top Democrat on the Judiciary Committee.

“Online retailers have, let’s face it, an unfair advantage,” said Conyers, a co-sponsor of one of three pending bills that would give states the ability to collect taxes on sales by out-of-state vendors.

Ground Rules

John Otto, an accountant and state senator from Texas, urged lawmakers to set ground rules for requiring the collection of online sales taxes.

If the 1992 Supreme Court decision “is allowed to remain the law of the land, are we not picking winners and losers within the retail sector?” Otto said. “The marketplace has changed in 19 years and we have not.”

In 2012 states will forgo an estimated $23 billion in uncollected taxes from out-of-state catalog and online sales, according to the National Conference of State Legislatures.

The issue has divided online retailers. Executives from San Jose-based EBay Inc. and Overstock.com of Salt Lake City cautioned lawmakers against passing a measure that would harm small businesses or saddle online retailers with added expenses.

“Unfortunately, the authors of recent remote sales tax bills have walked away from true small business protections. They want businesses everywhere to be collecting online everywhere. Obviously we disagree,” EBay vice president and deputy general counsel for government relations Todd Cohen said in his prepared remarks.

Overstock chairman and CEO Patrick Byrne said requiring companies like his to collect sales tax “would be very burdensome.”

Small Retailers

Byrne said efforts to pass sales tax legislation are an attempt by Amazon and other big retailers to hurt smaller rivals.

Amazon’s Misener said technology has advanced enough so that all but the smallest sellers can manage sales tax collections.

“With today’s computing and communications technology, widespread collection no longer would be an unconstitutional burden on interstate commerce, and Congress feasibly can authorize the states to require all but the very smallest volume sellers to collect,” Misener said.

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Editorial: Get online retailers to collect state sales tax

It is praiseworthy that a bipartisan duo of state House members has decided to take on the issue of getting more out-of-state retailers to collect Michigan taxes when they sell to Michigan residents. It's worth pushing, even if it seems like an exercise in futility.

California earlier this year faced down Amazon.com over this same issue, and after some serious scuffling -- including a threat from Amazon to lead a petition drive against the law the California Legislature passed -- Amazon agreed to start collecting sales taxes from its California customers next year.

The Michigan bill, proposed by Reps. Eileen Kowall, R-White Lake Township, and Jim Ananich, D-Flint, is similar to California's in requiring companies with affiliates and subsidiaries in Michigan to collect the tax.

Amazon, perhaps the chief online retailer affected by such moves, has retaliated against similar steps in other states, most often simply ending its affiliate agreements and, in a couple of cases, canceling plans for distribution centers. But California had the advantage of hosting several Amazon subsidiaries, and Michigan has one, too: Brilliance Audio in Grand Haven, which produces audiobooks.

Amazon is hardly alone among online and catalog retailers that skip sales tax collections when they have no physical presence in a state. They have that right, based on a U.S. Supreme Court ruling that says a state's ability to enforce sales tax collections doesn't extend beyond its own borders; if a company has no connection to a given state, that state can't order the company to do anything. (Instead, customers are supposed to cough up the equivalent amount, known as a use tax, on their income tax forms.)

That has led the states to broaden the definition of a company's presence, as the Michigan bill would -- a move that may lead to another round of legal battles.

But the Supreme Court decision also leaves room for a federal solution, with Congress ordering companies to collect the appropriate state and local sales taxes from customers. That is the ultimate and best solution, and U.S. Rep. John Conyers, D-Detroit, has already introduced a bill to do so.

In the age of computers and geographic information systems, this is no longer a complex task; big retailers that have both stores and online operations, such as Sears and Target, do it every day.

In the meantime, Michigan could reap about $36 million in taxes under the affiliates and subsidies provisions in this bill. That, however, represents only a slice of the $289 million in forgone sales taxes from all out-of-state companies that refuse to collect them, according to a recent study by Public Sector Consultants in Lansing.

It's important to note that sales and use taxes are paid by customers, not the businesses that sell to them. As Kowall and members of the Michigan Retailers Association stress, the failure to force this issue has become a tacit subsidy for online-only companies, no longer a fledgling industry. "It puts local retailers at a competitive disadvantage," Kowall said, and that is her primary motivation in pushing the bill.

Whether, and if so how, Amazon or any other out-of-state companies will fight Michigan's effort remains unknown. In an e-mail, Amazon spokesperson Mary Osako only said: "We believe this needs to be solved at the federal level, and we're working with the states, retailers and Congress to get federal legislation passed as soon as possible."

The reason to take this bill seriously is not the money involved, which is relatively small as the bill is written, but the pressure it will bring on Congress. Michigan is still a big enough state to make a difference, and on this issue, the Legislature should follow through.