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Bill to address over-reaching state laws draws criticism from online sales tax advocates

WASHINGTON – Supporters of federal legislation that would allow states to collect sales tax on purchases their residents make from online vendors in other states were drawn into an unlikely debate at a House Judiciary Committee panel hearing on Tuesday over housing conditions for hogs and chickens.

The hearing was held by the subcommittee on regulatory reform, commercial and antitrust law, to consider a bill that would address over-reaching state laws such as one adopted in 2010 by California law to prohibit the sale of pork and eggs from producers that don’t meet certain housing standards for their animals.

Rep. Jim Sensenbrenner, R-Wis., a member of the committee, has proposed the No Regulation Without Representation Act, H.R. 2887, which would prohibit states and localities from enacting laws that infringe on interstate commerce.

The bill is supported by a few groups such as Americans for Tax Reform and Digital Liberty along with the online retailer Overstock and the American Catalog Mailers Association. Spokesmen for the National Taxpayers Union and National Pork Producers Council testified in support of the measure at the hearing.

But governors and Main Street merchants who want sales tax parity for online sales issued statements saying Sensenbrenner’s bill goes overboard and would hurt their cause.

South Dakota State Sen. Deb Peters, testifying as president-elect of the National Conference of State Legislatures, said the bill would preclude sales tax collections from vendors attending the Sturgis Bike Rally held every summer in her home state. That’s because the proposal would exempt vendors from taxation if they are not in the state for at least 15 days. The event draws an estimated one million motorcycle enthusiasts.

South Dakota has no state income tax and heavily relies on consumption taxes to pay for local and state government services, said Peters. “Remember I am a Republican from a conservative state,” she added, characterizing Sensenbrenner’s bill “a bunker buster bomb instead of a surgical swipe.’’

The National Governors Association and National Conference of State Legislatures said in a joint statement that the bill’s "audacious scope not only expands the ‘physical presence’ rule to all state and local taxes, it swells it to capture all regulations.'' They called the bill “a direct threat to representative self-government.’’

Republican Rep. Doug Collins from Georgia said he won’t support the approach of the Sensenbrenner bill because “it goes well beyond addressing state regulatory overreach.’’

Instead, Collins said the committee should address the issue of remote sales taxes in a way that’s “clear and fair.’’

Collins said that In the 4-1/2 years he’s served in Congress, he's "taken more meetings on this one issue and anything combined.’’

He said he hasn’t decided yet whether to support the alternative approach, the Remote Transactions Fairness Act, sponsored by Reps Kristi Noem, R-S.D., and John Conyers, D-Mich. That bill requires states to provide sales tax collection software free of charge to remote sellers and a transition period for smaller remote sellers.

Conyers said Tuesday said he’s received letters of opposition to Sensenbrenner’s bill from seven organizations, including the Marketplace Fairness Coalition. That group backs the Noem-Conyers bill.

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