Dear Representative:
On behalf of the 350,000-member National Taxpayers Union (NTU), I urge you to cosponsor and work to enact H.R. 1956, the Business Activity Tax Simplification Act. This legislation is an important element of broader tax simplification efforts. To achieve this goal, it establishes a clear physical presence test to ensure that only businesses having employees or property physically present within a jurisdiction are subjected to business activity taxes in that jurisdiction.
In 1992, the U.S. Supreme Court ruled in Quill Corp. v. North Dakota that a state could not impose taxes on an out-of-state business unless that business has a "substantial nexus" within the taxing state. However, the Supreme Court declined to rule on the nexus standard as applied to business activity taxes, and decided to allow Congress to resolve the dispute. To date, it has not done so.
The integration of the Internet and telecommunications technologies has allowed businesses to expand across state lines, and interstate business activities are now commonplace. However, these developments have created confusion about when states are allowed to collect income taxes from out-of-state companies conducting certain activities within their jurisdiction. Unfortunately, governments are increasingly defining "substantial nexus" differently, leading to a complex matrix of tax rules. If this practice continues, it will have a dire effect on interstate commerce and the entire economy.
H.R. 1956 ends these harmful practices by establishing specific standards that define when businesses should be obliged to pay business activity taxes. The legislation ensures fairness, minimizes litigation, and creates a legally certain business climate that encourages companies to invest and expand interstate commerce. This legislation is a common-sense way for Congress to promote economic growth and interstate commerce and we urge all Members to cosponsor it.
Sincerely,
Paul J. Gessing
Director of Government Affairs