Republicans battle within party over online sales tax bill

Members of the House Judiciary Committee on Tuesday sparred over the implications of a bill that aims to take away states’ ability to collect online sales taxes.

Republicans clashed within their own party and with Democrats in a hearing over whether or not H.R. 2887, the “No Regulation Without Representation” act, would help local economies or violate principles of state sovereignty.

“For most of American history, it was axiomatic that states cannot regulate beyond their borders,” said Judiciary Chairman Bob Goodlatte (R-Va.). “H.R. 2887 would provide a clear congressional response that would, at the same time, protect states’ rights.”

Goodlatte contended that one state imposing an online sales tax could violate another’s right to govern. A bookseller in Idaho selling on Amazon to a buyer in Texas, for example, could be hypothetically affected by an online sales tax in Texas.

One Republican legislator from South Dakota, state Sen. Deb Peters, testifying before the committee, said the opposite effect would be achieved.

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“With respect to interstate sales tax collection, the No Regulation Without Representation Act unjustifiably pre-empts state authority,” Peters said, arguing that the legislation Goodlatte is supporting would unfairly bar states from regulating commerce within their own borders.

Peters argued that the bill would negatively impact states’ ability to accrue revenue from sales tax as online commerce grows.

“If you tie my hands — that pays for 80 percent of my budget, I have to do something,” she told Judiciary lawmakers.

Democrats on the Judiciary panel joined Peters in criticizing the bill.

Ranking member David Cicilline (D-R.I.) joked that a more apt name for the bill would be “destroying locally owned business and state sovereignty act.”

“Requiring physical presence would steal billions from state budgets every year,” Cicilline said, referring to a consideration in the bill that would only allow states to impose sales taxes on vendor’s products who physically operate within the border of the state.

“This bill is an existential threat to the sovereignty of state governments,” he continued.

Some House Republican on the committee expressed more tepid opposition or were hesitant to voice a firm stance on the bill.

Rep. Doug Collins (R-Ga.) said that while he would like to see more discourse and debate over online sales tax reform, he was not in support of the bill in its current form as it “ignores the reality of a modern economy.”

“My concern is that the breadth of this legislation goes well beyond addressing the state regulatory overreach,” Collins said. “This legislation … impliedly closes the door on any opportunity to address this issue in a way that addresses the needs of states, their citizens, online retailers, local businesses and the economy as a whole.”

Technology companies and their trade associations have largely kept quiet about the legislation. The Internet Association, a trade group representing major internet firms such as eBay and Amazon, has not publicly voiced an opinion on the matter yet. The Information Technology Industry Council, who represents those companies on Capitol Hill, also has not said anything yet, though it did caution against implementing an online sales tax in 2012.

One association representing e-commerce sites, however, has pushed back on the matter. NetChoice whose members include  Overstock and Ebay has called a state instituted online sales taxes “unconstitutional” and advocated in support of the disputed bill. 

This story was updated on July 27, 2017 at 3:20 p.m.