Business Activity Tax Simplification Act of 2006 - Extends the general federal prohibition against state taxation (i.e., net income taxation) of interstate commerce to include taxation of out-of-state transactions involving all forms of property, including intangible personal property and services (currently, only sales of tangible personal property are protected). Extends such prohibition to other business activity taxes (defined as taxes imposed on or measured by gross receipts, gross income, or gross profits, a business license tax, a business and occupation tax, a franchise tax, a single business tax or a capital stock tax, or any other tax based on business activity).
Prohibits state taxation of activities in interstate commerce unless the taxpayer has a physical presence in the taxing state. Defines "physical presence in a state" to mean business and leasing activities for more than 21 days in the taxing state. Disregards in determining such 21-day period: (1) activities relating to the purchase of goods or services for a business; (2) news-gathering activities; (3) certain meetings with government officials; (4) attending educational or training conferences; or (5) participation in charitable activities. Reduces the 21-day period to one day for: (1) live performances and sporting events in the taxing state when the audience is more than 100 individuals; (2) sales of tangible personal property made in the taxing state if delivery is completed in such state; and (3) the performance of services that physically affect real property within the taxing state.
Excludes from this Act's prohibition against state taxation: (1) entities incorporated or formed under the laws of such state; (2) individuals domiciled in such state; and (3) the owner or beneficiary of a partnership, S corporation, limited liability company, or similar entity that has a physical presence in the taxing state.
[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1956 Introduced in House (IH)]
109th CONGRESS
1st Session
H. R. 1956
To regulate certain State taxation of interstate commerce; and for
other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
April 28, 2005
Mr. Goodlatte (for himself, Mr. Boucher, Mr. Crowley, Mr. Forbes, Mr.
Meeks of New York, Mr. Chabot, Mr. Bachus, Mr. Boehner, Mrs. Drake, Mr.
Tiberi, Mr. Cantor, Mr. Moran of Virginia, and Mr. Smith of Texas)
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 2005''.
SEC. 2. REMOVAL OF CERTAIN LIMITATIONS ON THE APPLICATION 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 subsection (a)(1) by striking ``of tangible'' and
all that follows through ``State; and'' and inserting the
following:
``or transactions, which orders are sent outside the State for
approval or rejection and, if approved, 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 from a
point outside the State;
and'';
(2) in subsection (c)--
(A) by inserting ``or fulfilling transactions''
after ``making sales'';
(B) by inserting ``or transactions'' after
``sales'' the other places it appears; and
(C) by striking ``of tangible personal property''
each place it appears; and
(3) in subsection (d) by striking ``the sale of, tangible
personal property'' and inserting ``a sale or transaction,''.
(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. Beginning with taxable periods beginning on or after
the first day of the first calendar year that begins after the date of
the enactment of the Business Activity Tax Simplification Act of 2005,
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 4 of the Business Activity Tax
Simplification Act of 2005. 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 of Subsection (a) Amendments.--The amendments
made by subsection (a) shall apply with respect to the imposition,
assessment, and collection of taxes for taxable periods beginning on or
after the first day of the first calendar year that begins after the
date of the enactment of the Business Activity Tax Simplification Act
of 2005.
SEC. 3. 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.--For the purposes of
subsection (a), a person has a physical presence in a State only if
such person's business activities within the State include any of the
following during such person's taxable year:
(1) Being an individual physically within the State, or
assigning one or more employees to be in the State, on more
than 21 days, except that the following shall be disregarded in
determining whether such 21-day limit has been exceeded:
(A) Activities in connection with a possible
purchase of goods or services for the business.
(B) Gathering news and covering events for print,
broadcast, or other distribution through the media.
(C) Meeting government officials for purposes other
than selling goods or services.
(D) Participation in educational or training
conferences, seminars or other similar functions.
(E) Participating in charitable activities.
(2) Using the services of another person, except an
employee, in the State, on more than 21 days to establish or
maintain the market in the State, unless such other person
performs similar functions on behalf of at least one additional
business entity during the taxable year.
(3) The leasing or owning of tangible personal property or
of real property in the State on more than 21 days, except that
the following shall be disregarded in determining whether such
21-day limit has been exceeded:
(A) Tangible personal property located in the State
for purposes of being assembled, manufactured,
processed, or tested by another person for the benefit
of the owner or lessee, or used to furnish a service to
the owner or lessee by another person.
(B) Marketing or promotional materials distributed
in the State using mail or a common carrier, or as
inserts in or components of publications.
(C) Any property to the extent used ancillary to an
activity excluded from the computation of the 21-day
period under paragraph (1) or (2).
(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) Exceptions.--
(1) Domestic business entities and individuals domiciled in
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 the State in
which the tax is imposed.
(2) Taxation of partners and similar persons.--If a taxing
authority is not prohibited by this section from taxing 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, a trust, or an estate, or another similar
entity, that taxing authority is also not prohibited by this
section from taxing the owners or beneficiaries of the entity,
if State law imposes the tax not on the entity itself but on
the entity's owners or beneficiaries, whether or not they are
in the State, with respect to their ownership interest in the
entity.
(3) Certain activities.--With respect to the following,
subsection (b) shall be read by substituting ``one day'' for
``more than 21 days'':
(A) The sale within a State of tangible personal
property, where delivery of the property originates and
is completed within the State.
(B) The performance of services that physically
affect real property within a State.
(4) Exception relating to certain performances and sporting
events.--With respect to the taxation of the following,
subsection (b) shall be read by substituting ``one day'' for
``more than 21 days'':
(A) A live performance in a State, before a live
audience of more than 100 individuals.
(B) A live sporting event in a State before more
than 100 spectators present at the event.
(e) 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.).
SEC. 4. DEFINITIONS.
The following definitions apply in this Act:
(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) The term ``other business activity tax''
means--
(i) a tax imposed on or measured by gross
receipts, gross income, or gross profits;
(ii) a business license tax;
(iii) a business and occupation tax;
(iv) a franchise tax;
(v) a single business tax or a capital
stock tax; or
(vi) any other tax imposed by a State on a
business for the right to do business in the
State or measured by the amount of, or economic
results of, business or related activity
conducted in the State.
(B) The term ``other business activity tax'' does
not include a transaction tax.
(3) 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.
SEC. 5. EFFECTIVE DATE.
Except as provided otherwise in this Act, this Act applies with
respect to taxable periods beginning on and after the first day of the
first year that begins after the date of enactment of this Act.
<all>
Introduced in House
Introduced in House
Referred to the House Committee on the Judiciary.
Referred to the Subcommittee on Commercial and Administrative Law.
Subcommittee Hearings Held.
Subcommittee Consideration and Mark-up Session Held.
Forwarded by Subcommittee to Full Committee (Amended) by Voice Vote.
Committee Consideration and Mark-up Session Held.
Ordered to be Reported (Amended) by Voice Vote.
Reported (Amended) by the Committee on Judiciary. H. Rept. 109-575.
Reported (Amended) by the Committee on Judiciary. H. Rept. 109-575.
Placed on the Union Calendar, Calendar No. 330.
Rules Committee Resolution H. Res. 939 Reported to House. Rule provides for consideration of H.R. 1956 with 1 hour of general debate. Previous question shall be considered as ordered without intervening motions except motion to recommit with or without instructions. Measure will be considered read. Bill is closed to amendments.
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