[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1956 Reported in House (RH)]
Union Calendar No. 330
109th CONGRESS
2d Session
H. R. 1956
[Report No. 109-575]
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
July 17, 2006
Additional sponsors: Mrs. Blackburn, Mr. Wilson of South Carolina, Mr.
Upton, Mr. Gallegly, Mr. Carter, Mr. Souder, Mr. Ramstad, Mr. King of
Iowa, Ms. Hart, Mr. Cole of Oklahoma, Mr. Garrett of New Jersey, Mr.
Barrett of South Carolina, Mr. Pence, Mrs. Jo Ann Davis of Virginia,
Mr. Latham, Mr. Marchant, Mr. Brown of South Carolina, Mr. Rogers of
Kentucky, Mr. Kolbe, Mr. Flake, Mr. Franks of Arizona, Mr. English of
Pennsylvania, Ms. Herseth, Mr. Murphy, Mr. Bishop of Utah, Mr. Jenkins,
Mr. Feeney, and Mr. Daniel E. Lungren of California
July 17, 2006
Reported with an amendment, committed to the Committee of the Whole
House on the State of the Union, and ordered to be printed
[Strike out all after the enacting clause and insert the part printed
in italic]
[For text of introduced bill, see copy of bill as introduced on April
28, 2005]
_______________________________________________________________________
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 2006''.
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;
(C) by striking ``of tangible personal property''
the first place it appears; and
(D) by striking ``, of tangible personal
property''; and
(3) in subsection (d)(1) 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 2006,
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 2006. 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 2006.
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 in the State include any of the
following, collectively and on more than 21 days in the aggregate,
during such person's taxable year:
(1) Being an individual physically in the State, or
assigning one or more employees to be in the State, except that
the following shall be excluded in determining whether such 21-
day limit has been exceeded:
(A) Activities in connection with a possible or an
actual purchase of goods or services, for consumption
by the person's business.
(B) Gathering news for print, broadcast, or other
distribution through the news media.
(C) Meeting government officials for purposes other
than selling goods or services, for consumption by such
government.
(D) Merely attending educational or training
conferences, seminars or other similar functions.
(E) Nonprofit participation in charitable
activities.
(2) 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.
(3) The leasing or owning of tangible personal property or
of real property in the State, except that the following shall
be excluded 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.
(C) Any property to the extent used ancillary to an
activity excluded from the computation of the 21-day
period based on 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, 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 (26 U.S.C. 1361)), a
limited liability company, 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 Act or of any other
Federal law.
(4) Certain activities.--With respect to the following,
subsection (b) shall be read by substituting ``at least one
day'' for ``more than 21 days in the aggregate'':
(A) The sale within a State of tangible personal
property, if delivery of the property originates and is
completed within the State.
(B) The performance of services that physically
affect real property within a State.
(5) Exception relating to certain performances and sporting
events.--With respect to the taxation of the following,
subsection (b) shall be read by substituting ``at least one
day'' for ``more than 21 days in the aggregate'':
(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 sales tax, a use tax, or a similar tax,
imposed as the result of the sale or acquisition of
goods or services, whether or not denominated a tax
imposed on the privilege of doing business.
(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.
(4) Tangible personal property.--The term ``tangible
personal property'' does not include computer software that is
owned and licensed by the owner to another person.
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.
Union Calendar No. 330
109th CONGRESS
2d Session
H. R. 1956
[Report No. 109-575]
_______________________________________________________________________
A BILL
To regulate certain State taxation of interstate commerce; and for
other purposes.
_______________________________________________________________________
July 17, 2006
Reported with an amendment, committed to the Committee of the Whole
House on the State of the Union, and ordered to be printed