Coalition to Protect Interstate Commerce
Statement on House Small Business Committee Hearing to Examine Impact of Business Activity Taxes on Small Businesses
(Washington, DC)—The Coalition to Protect Interstate Commerce (CPIC) issued the following statement on today’s House Small Business Committee hearing examining the impact that the business activity tax has on small businesses:
“We applaud Chairwoman Velasquez for listening to small businesses that are suffering as a result of onerous, and often multiple, taxation by States where they have customers but no physical presence,” said CPIC Spokeswoman Tara Bradshaw.
“The cosponsors of the House and Senate bills and we hope eventually a majority of members of Congress, understand that Congress has a duty to step in when some states impede the free flow of interstate commerce. The entrepreneurial spirit upon which this great country was founded and which allows large and small businesses alike to be the engine of growth for our economy, is being jeopardized as an increasing number of states clearly overreach in their efforts to collect state business activity taxes.
“The Business Activity Tax Simplification Act of 2008 would create bright line tests to ensure that states continue to have the ability to tax businesses that operate within their borders, employ people and have property within their boundaries, and utilize the services those states and municipalities provide. However, the legislation also clarifies that ‘doing business in a state’ does not mean simply having customers in the state.
“We urge Congress to take action on this important legislation to provide small businesses with clear rules for interstate taxation.”
H.R. 5267, the “Business Activity Tax Simplification Act of 2008,” was introduced on February 7, 2008 by Representatives Rick Boucher (D-VA) and Bob Goodlatte (R-VA). The other original cosponsors include: Representatives Artur Davis (D-AL), Steve Chabot (R-OH), Stephanie Herseth Sandlin (D-SD), Tom Feeney (R-FL), Sheila Jackson-Lee (D-TX), Elton Gallegly (R-CA), Hank Johnson (D-GA), Mike Pence (R-IN), Zoe Lofgren (D-CA), Bobby Scott (D-VA) and Robert Wexler (D-FL). The legislation will be referred to the House Judiciary Committee, on which Boucher, Goodlatte and most of the other cosponsors serve.
Many states are aggressively trying to subject companies with no physical property or employees to taxes, simply because customers are located in the state. This unfair tax treatment subjects businesses to a complex, unpredictable, and unfriendly environment, where ultimately, these costs get passed on to consumers. Businesses are forced to spend more time, money, and energy on accounting and, if they can afford it, litigation. Furthermore, these taxes limit economic growth and sustainability.
Congress has an obligation to act to curtail state taxation that unduly burdens interstate commerce. The Business Activity Tax Simplification Act of 2008 would set forth a bright-line standard clarifying that states and localities may collect business activity taxes from out-of-state entities only when they have a physical presence in the taxing state. It would also modernize Public Law 86-272, which Congress enacted forty-nine years ago. As currently written, that law prohibits the states from assessing net income-based taxes against a business when its only contact with the state involves the solicitation of orders in the state for tangible personal property. BATSA would modernize P.L. 86-272, so that in addition to tangible personal property, it would also apply to intangible property and services. Furthermore, it would apply to all direct taxes on a business, not just those based on net income.