House Judiciary Posts Witnesses for Digital Sales Tax Hearing

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By Ryan Prete

A South Dakota lawmaker who backed the state’s statute mandating remote retailers collect sales tax will testify before a House Judiciary subcommittee on a federal bill restricting states’ taxing authority over out-of-state sellers.

The Subcommittee on Regulatory Reform, Commercial and Antitrust Law will hold a July 25 hearing on Rep. Jim Sensenbrenner’s (R-Wis.) No Regulation Without Representation Act of 2017 (H.R. 2887). Introduced June 12, the bill would prohibit states from:

  • telling out-of-state businesses how to make or dispose of their products; and
  • imposing income tax or sales tax collection burdens on remote businesses.
Released July 21, the hearing’s witness list includes South Dakota State Sen. Deb Peters (R), president-elect of the National Conference of State Legislatures. South Dakota took an early lead among states enacting legislation challenging the U.S. Supreme Court’s 1992 decision, Quill Corp. v. North Dakota, which prohibits states from imposing sales and use tax collection obligations on vendors without a physical presence in-state.

Peters sponsored the state’s “economic nexus” statute, S.B. 106 (codified as S.D. Codified Laws Chapter 10-64), which requires remote retailers with annual in-state sales exceeding $100,000 or 200 separate transactions to collect and remit sales tax. The state’s Sixth Judicial Circuit Court found the law unconstitutional under Quill, and the matter is now before South Dakota’s Supreme Court.

Other witnesses who will testify before the House subcommittee are:

  •  Neil Dierks, CEO of the National Pork Producers Council
  •  Chad E. DeVeaux, associate at Atkinson, Andelson, Loya, Ruud & Romo
  •  Andrew Moylan, executive vice president of the National Taxpayers Union

‘Keep Regulation in Check’

“American businesses large and small are suffocating under an ever increasing mountain of regulations,” Rep. Robert Goodlatte (R-Va.), House Judiciary Committee chairman, said in the release. “One particular problem is the issue of states aggressively imposing regulatory burdens on out-of-state businesses that cannot easily fight back. The principle goal of the No Regulation Without Representation Act is to keep regulation in check by ensuring accountability between regulator and regulated.”

“I look forward to hearing from our expert panel of witnesses on the impact extraterritorial state regulations are having on American businesses and how to address this problem legislatively in order to preserve state sovereignty and increase economic growth,” said Goodlatte, who is co-sponsor on Sensenbrenner’s bill.

Some have welcomed the hearing as a long-overdue step in addressing the cross-border taxation debate—but others have protested the narrow scope of the hearing, which isn’t expected to discuss other remote sales tax proposals. Many have singled out Goodlatte as the primary roadblock for competing e-commerce proposals that widen the reach of states’ taxing authority.

A hearing hasn’t been scheduled on a competing House measure, the Remote Transactions Parity Act of 2017 (H.R. 2193), which would allow states to mandate out-of-state sellers and online vendors collect tax on in-state sales. The RTPA was introduced in late April, alongside the introduction of the Marketplace Fairness Act of 2017 (S. 976) in the Senate, which would also expand states’ taxing authority over remote retailers.

‘Not Good Nor Sensible’

During a July 21 panel at New York University’s Summer Institute on Intermediate Taxation, a state tax administrator voiced concerns over Sensenbrenner’s legislation.

“The No Regulation Without Representation proposal is not good nor sensible legislation,” said Kevin Sullivan, commissioner of the Connecticut Department of Revenue Services. “It makes no good sense to say that corporations would be burdened by taxing consumers. It’s an absurdity.”

To contact the reporter on this story: Ryan Prete in New York at rprete@bna.com

To contact the editor responsible for this story: Jennifer McLoughlin at jmcloughlin@bna.com

For More Information

The witness list is at http://src.bna.com/q0N

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