Business Activity Tax Simplification Act
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House Judiciary Subcommittee to Consider Sensenbrenner Bill Tomorrow

The No Regulation Without Representation Act of 2017 (NRWRA) is scheduled for a hearing before the House Judiciary Subcommittee on Regulatory Reform, Commercial and Antitrust Law on Tuesday, July 25 at 10:00 am EDT in 2141 Rayburn House Office Building. The bill was introduced by Congressman Jim Sensenbrenner (R-WI) last month with House Judiciary Chairman Bob Goodlatte (R-VA) as one of seven original co-sponsors. As described in more detail below, the bill would codify the Bellas Hess “physical presence” requirement upheld by the US Supreme Court in Quill and make that requirement applicable to sales, use and other similar transactional taxes, notice and reporting requirements, net income taxes and other business activity taxes. Extending the concept to an area far beyond state taxation, the bill would also require the same physical presence for a state or locality to regulate the out-of-state production, manufacturing or post-sale disposal of any good or service sold to locations within its jurisdictional borders.

In the last Congress, the Business Activity Tax Simplification Act of 2015 (BATSA) would have codified a physical presence requirement in the context of business activity taxes (e.g., net income and gross receipts taxes). However, the scope of NRWRA’s limitations on interstate regulation and tax differs from the standard set forth in BATSA. Specifically, under BATSA, assigning an employee to a state constitutes physical presence, whereas under NRWRA a company does not have physical presence until it employs more than two employees in the state (or a single employee if he or she is in the state and provides design, installation or repair services or “substantially assists” in establishing or maintaining a market). Under NRWRA, activities related to the potential or actual purchase of goods or services in the state or locality are not a physical presence if the final decision to purchase is made outside of the jurisdiction. (more…)




House Judiciary Committee Approves Three State Tax Bills

Yesterday, on June 17, 2015, three state tax bills were favorably reported to the United States House of Representatives (House) by the House Judiciary Committee (House Judiciary) after considering each during a half-day markup. The bills that were advanced included: (1) the Mobile Workforce State Income Tax Simplification Act (Mobile Workforce, H.R. 2315); (2) the Digital Goods and Services Tax Fairness Act (DGSTFA, H.R. 1643); and (3) the Business Activity Tax Simplification Act (BATSA, H.R. 2584).

Mobile Workforce State Income Tax Simplification Act

The Mobile Workforce bill was the first considered and seeks to establish a clear, uniform framework for when states may tax non-resident employees that travel for work. As advanced, the bill generally allows states to impose income tax compliance burdens on non-resident individuals only when the non-resident works in a state other than their state of residence for more than 30 days in a year. The bill also prevents those states from imposing a withholding requirement on employers for wages paid to such employees. Three proposed amendments seeking to limit the adverse revenue impact to New York were discussed and rejected. The Mobile Workforce bill was then favorably reported to the House by a vote of 23-4.

Digital Goods and Services Tax Fairness Act

DGSTFA would implement a uniform sourcing framework for states and localities seeking to tax digital goods and services. In doing so, the bill prevents any state or locality from imposing multiple or discriminatory taxes. Of the three pieces of legislation considered yesterday, only the DGSTFA was amended. The amendment, offered by the bill’s lead sponsor Representative Lamar Smith, was technical in nature and did not change the basic protections the bill would provide. At the markup, Chairman Goodlatte noted that the National Governors Association (NGA), which had previously voiced objections, was no longer opposed to the legislation after the revisions—though the NGA testimony indicated that the organization could not support the legislation without addressing the remote seller sales tax nexus issue.

The first technical changes in the adopted amendment were to the definitions of delivered or transferred electronically and provided electronically. The amendment added the term digital good and digital service after each respective term of art to clarify that digital goods are delivered or transferred electronically, whereas digital services are provided electronically. The second technical change was to the definition of digital good. In modifying the term, the amendment clarifies that streaming and other similar digital transmissions that do not “result in the delivery to the customer of a complete copy of such software or other good, with the right to use permanently or for a specified period” are not digital goods and would instead fall under the definition of a digital service.

Business Activity Tax Simplification Act

BATSA would codify the prerequisite of physical presence for a state to impose a direct tax on a non-resident business. BATSA would modernize the existing federal protection against state income taxation offered under P.L. 86-272 to include solicitation for sales of intangible property and services [...]

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