HR 5267
110th CONGRESS
2d Session
H. R. 5267
To regulate certain State taxation of interstate commerce, and
for other purposes.
IN THE HOUSE OF REPRESENTATIVES
February 7, 2008
Mr. BOUCHER (for himself, Mr. GOODLATTE, Mr. DAVIS of Alabama, Mr. CHABOT,
Ms. HERSETH SANDLIN, Mr. FEENEY, Ms. JACKSON-LEE of Texas, Mr. GALLEGLY,
Mr. JOHNSON of Georgia, Mr. PENCE, Ms. ZOE LOFGREN of California, Mr.
SCOTT of Virginia, and Mr. WEXLER) introduced the following bill; which
was referred to the Committee on the Judiciary
A BILL
To regulate certain State taxation of interstate commerce, and
for other purposes.
Be it enacted by the Senate and House of Representatives of the United
States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the `Business Activity Tax Simplification Act
of 2008'.
SEC. 2. MODERNIZATION OF PUBLIC LAW 86-272.
(a) Solicitations With Respect to Sales and Transactions of Other Than
Tangible Personal Property- Section 101 of the Act entitled `An Act relating
to the power of the States to impose net income taxes on income derived
from interstate commerce, and authorizing studies by congressional committees
of matters pertaining thereto', approved September 14, 1959 (15 U.S.C.
381 et seq.) is amended--
(1) in section (a), by striking `either, or both,' and inserting `any
one or more';
(2) in subsection (a)(1), by striking `by such person' and all that
follows and inserting `(which are sent outside the State for approval
or rejection) or customers by such person, or his representative, in
such State for sales or transactions, which are--
`(A) in the case of tangible personal property, filled by shipment
or delivery from a point outside the State; and
`(B) in the case of all other forms of property, services, and other
transactions, fulfilled or distributed from a point outside the State;';
(3) in subsection (a)(2), by striking the period at the end and inserting
a semicolon;
(4) in subsection (a), by adding at the end the following new paragraphs:
`(3) the furnishing of information to customers or affiliates in such
State, or the coverage of events or other gathering of information in
such State by such person, or his representative, which information
is used or disseminated from a point outside the State; and
`(4) those business activities directly related to such person's potential
or actual purchase of goods or services within the State if the final
decision to purchase is made outside the State.';
(5) by striking subsection (c) and inserting the following new subsection:
`(c) For purposes of subsection (a) of this section, a person shall not
be considered to have engaged in business activities within a State during
any taxable year merely--
`(1) by reason of sales or transactions in such State, the solicitation
of orders for sales or transactions in such State, the furnishing of
information to customers or affiliates in such State, or the coverage
of events or other gathering of information in such State, on behalf
of such person by one or more independent contractors;
`(2) by reason of the maintenance of an office in such State by one
or more independent contractors whose activities on behalf of such person
in such State consist solely of making sales or fulfilling transactions,
soliciting order for sales or transactions, the furnishing of information
to customers or affiliates, or the coverage of events or other gathering
of information; or
`(3) by reason of the furnishing of information to an independent contractor
by such person ancillary to the solicitation of orders or transactions
by the independent contractor on behalf of such person.'; and
(6) in subsection (d)(1)--
(A) by inserting `or fulfilling transactions,' after `selling'; and
(B) by striking `the sale of, tangible personal property' and inserting
`a sale or transaction, furnishing information, or covering events,
or otherwise gathering information'.
(b) Application of Prohibitions to Other Business Activity Taxes- Title
I of the Act entitled `An Act relating to the power of the States to impose
net income taxes on income derived from interstate commerce, and authorizing
studies by congressional committees of matters pertaining thereto', approved
September 14, 1959, (15 U.S.C. 381 et seq.) is amended by adding at the
end the following:
`Sec. 105. For taxable periods beginning on or after January 1, 2009,
the prohibitions of section 101 that apply with respect to net income
taxes shall also apply with respect to each other business activity tax,
as defined in section 3(g) of the Business Activity Tax Simplification
Act of 2008. A State or political subdivision thereof may not assess or
collect any tax which by reason of this section the State or political
subdivision may not impose.'.
(c) Effective Date- The amendments made by this section shall apply with
respect to the imposition, assessment, and collection of taxes for taxable
periods beginning on or after January 1, 2009.
SEC. 3. MINIMUM JURISDICTIONAL STANDARD FOR STATE AND LOCAL NET INCOME
TAXES AND OTHER BUSINESS ACTIVITY TAXES.
(a) In General- No taxing authority of a State shall have power to impose,
assess, or collect a net income tax or other business activity tax on
any person relating to such person's activities in interstate commerce
unless such person has a physical presence in the State during the taxable
period with respect to which the tax is imposed.
(b) Requirements for Physical Presence-
(1) IN GENERAL- For purposes of subsection (a), a person has a physical
presence in a State only if such person's business activities in the
State include any of the following during such person's taxable year:
(A) Being an individual physically in the State, or assigning one
or more employees to be in the State.
(B) Using the services of an agent (excluding an employee) to establish
or maintain the market in the State, if such agent does not perform
business services in the State for any other person during such taxable
year.
(C) The leasing or owning of tangible personal property or of real
property in the State.
(2) DE MINIMIS PHYSICAL PRESENCE- For purposes of this section, the
term `physical presence' shall not include--
(A) presence in a State for less than 15 days in a taxable year (or
a greater number of days if provided by State law); or
(B) presence in a State to conduct limited or transient business activity.
(c) Taxable Periods Not Consisting of a Year- If the taxable period for
which the tax is imposed is not a year, then any requirements expressed
in days for establishing physical presence under this Act shall be adjusted
pro rata accordingly.
(d) Minimum Jurisdictional Standard- This section provides for minimum
jurisdictional standards and shall not be construed to modify, affect,
or supersede the authority of a State or any other provision of Federal
law allowing persons to conduct greater activities without the imposition
of tax jurisdiction.
(1) DOMESTIC BUSINESS ENTITIES AND INDIVIDUALS DOMICILED IN, OR RESIDENTS
OF, THE STATE- Subsection (a) does not apply with respect to--
(A) a person (other than an individual) that is incorporated or formed
under the laws of the State (or domiciled in the State) in which the
tax is imposed; or
(B) an individual who is domiciled in, or a resident of, the State
in which the tax is imposed.
(2) TAXATION OF PARTNERS AND SIMILAR PERSONS- This section shall not
be construed to modify or affect any State business activity tax liability
of an owner or beneficiary of an entity that is a partnership, an S
corporation (as defined in section 1361 of the Internal Revenue Code
of 1986), a limited liability company (classified as a partnership for
Federal income tax purposes), a trust, an estate, or any other similar
entity, if the entity has a physical presence in the State in which
the tax is imposed.
(3) PRESERVATION OF AUTHORITY- This section shall not be construed to
modify, affect, or supersede the authority of a State to bring an enforcement
action against a person or entity that may be engaged in an illegal
activity, a sham transaction, or any perceived or actual abuse in its
business activities if such enforcement action does not modify, affect,
or supersede the operation of any provision of this section or of any
other Federal law.
(f) Rule of Construction- This section shall not be construed to modify,
affect, or supersede the operation of title I of the Act entitled `An
Act relating to the power of the States to impose net income taxes on
income derived from interstate commerce, and authorizing studies by congressional
committees of matters pertaining thereto', approved September 14, 1959
(15 U.S.C. 381 et seq.).
(g) Definitions, etc- For purposes of this section:
(1) NET INCOME TAX- The term `net income tax' has the meaning given
that term for the purposes of the Act entitled `An Act relating to the
power of the States to impose net income taxes on income derived from
interstate commerce, and authorizing studies by congressional committees
of matters pertaining thereto', approved September 14, 1959 (15 U.S.C.
381 et seq.).
(2) OTHER BUSINESS ACTIVITY TAX-
(A) IN GENERAL- The term `other business activity tax' means any tax
in the nature of a net income tax or tax measured by the amount of,
or economic results of, business or related activity conducted in
the State.
(B) EXCLUSION- The term `other business activity tax' does not include
a sales tax, a use tax, or a similar transaction tax, imposed on the
sale or acquisition of goods or services, whether or not denominated
a tax imposed on the privilege of doing business.
(3) PERSON- The term `person' has the meaning given such term by section
1 of title 1 of the United States Code.
(4) STATE- The term `State' means any of the several States, the District
of Columbia, or any territory or possession of the United States, or
any political subdivision of any of the foregoing.
(5) TANGIBLE PERSONAL PROPERTY- For purposes of subsection (b)(1)(C),
the leasing or owning of tangible personal property does not include
the leasing or licensing of computer software.
(h) Effective Date- This section shall apply with respect to taxable periods
beginning on or after January 1, 2009.
END
