Business Reps Call on House to Pass BAT Nexus Bill
Business Reps Call on House to Pass BAT Nexus Bill
- Institutional AuthorsCoalition for Interstate Tax Fairness & Job Growth
- Cross-Reference
- Subject Area/Tax Topics
- Jurisdictions
- LanguageEnglish
- Tax Analysts Document NumberDoc 2012-4279
- Tax Analysts Electronic Citation2012 TNT 41-18
February 28, 2012
The Honorable John Boehner
Speaker of the House of Representatives
Capitol Building, H-232
Washington, DC 2051-6501
The Honorable Nancy Pelosi
Democratic Leader
Capitol Building, H-204
Washington, DC 20515-6537
Dear Speaker Boehner and Democratic Leader Pelosi:
The below-listed businesses, trade associations and taxpayer groups strongly support H.R. 1439, the Business Activity Tax Simplification Act of 2011 ("BATSA"), and respectfully ask for your help to pass it into law this year.
BATSA, which enjoys bipartisan support, resolves an issue of critical importance to businesses that operate across state lines. A version of the legislation has been introduced in Congress since 2002. Congressmen Bob Goodlatte (R-VA) and Robert Scott (D-VA) every introduced the most recent version of the bill in April 2011. The House Judiciary Committee approved the legislation by voice vote and reported it to the full House last summer.
The Congressional Budget Office did not score the federal revenue impact of H.R. 1439 in the current Congress because of a change in its scoring protocols. But, in a previous Congress, CBO estimated that BATSA would increase federal revenue by $3.1 billion over 10 years. The revenue would result from lower federal deductions for state and local tax assessments that would be disallowed if the bill were enacted. In short, if BATSA became law, our ballooning federal deficit would decline.
Moreover, enactment of BATSA would lead to greater investment in U.S. business growth and jobs by clarifying the standards for the imposition of business activity taxes by states and localities on multistate businesses and by resolving widespread uncertainty caused by inconsistent and ambiguous state interpretations of the constitutional standard for state taxation of interstate commerce. If the bill were to become law, businesses would not be avoiding taxes. They would simply be paying taxes in the proper jurisdictions.
The longstanding rule governing state taxation provides that state and local governments may impose taxes on an out-of-state company only if that company has a physical presence in the taxing state. More recently, some states and localities have attempted to circumvent that rule by trying to impose business activity taxes on businesses that merely have customers in their jurisdictions. Such an aggressive "economic nexus" approach violates the Constitution's Commerce Clause, has a chilling effect on the national economy and produces unfair compliance burdens for businesses, large and small, that operate in interstate commerce. Even worse, the burdens associated with overreaching state taxation threaten U.S. job creation.
The "economic nexus" standard's low threshold for business activity taxation stands in marked contrast not only to the physical presence standard, but also to the permanent establishment concept that the U.S. uses in its treaties with other nations. Permanent establishment clauses prohibit the federal government -- but not state and local governments -- from imposing income-based taxes on foreign companies unless they have a physical presence in the taxing jurisdiction. So, in circumstances in which tax treaties protect nonresident foreign companies from federal tax assessments, economic nexus allows states to assess income-based taxes against foreign businesses even though they need to pay no federal tax; this is having a serious chilling effect on foreign investments in the U.S. Foreigners have noticed how aggressive states have become in asserting state tax assessments against foreign companies that are otherwise protected from federal tax by the permanent establishment rules. The ambassadors from France, Switzerland and the Netherlands wrote last year to the governor of New Jersey to complain about its extraterritorial taxation regime, which seeks tax payments from companies located abroad with no physical presence at all in the U.S. And, to make matters worse, to the extent that states -- as a practical matter -- seek to impose economic nexus taxation on U.S. companies but not foreign companies due to ease of enforcement, there may be discrimination against U.S. businesses.
BATSA codifies the traditional physical presence standard. Pursuant to the bill, a state or locality cannot impose a business activity tax on a company unless that business has a physical presence (such as employees, an office or property that is either leased or owned) in that state for more than a de minimis number of days in a taxable year. The bill protects businesses from business activity taxation if the company merely solicits sales in the state or enters the state merely to purchase goods or property.
BATSA applies to all direct taxes levied by states. This includes income taxes, gross receipts taxes, gross profits taxes, single business taxes, franchise taxes, capital stock taxes and occupation taxes. BATSA does not apply to transaction taxes based on gross business and receipts, such as sales and use taxes or gross premium charges on insurance companies.
The physical presence standard in BATSA is the most appropriate standard for business activity taxation because it is a fair, uniform standard that is easily understood and applied. BATSA's bright-line standard will eliminate confusion for state tax administrators and businesses, resulting in less litigation, fewer audits and less tax compliance guesswork. The bill also will unite the standard for business activity taxes at the state and local level with the standard that is used by the U.S. in its treaties with foreign countries.
Thank you in advance for your attention to this important issue.
Agilent Technologies, Inc.
Akzo Nobel Inc.
Alcoa Inc.
American Bankers Association
American Express Company
American Financial Services Association
American Homeowners Grassroots Alliance
American Legislative Exchange Council
American Moving & Storage Association
American Trucking Associations
Apple Inc.
Arch Coal, Inc.
Automotive Aftermarket Industry Association
Barclays Capital
Bay Beyond Inc.
Bayer Corporation
Beall's, Inc.
Big Lots Stores, Inc.
BMC Software
Boehringer Ingelheim Pharmaceuticals, Inc.
Burger King Corporation
Business and Institutional Furniture Manufacturers Association (BIFMA)
Business Council of Alabama
California Bankers Association
California Taxpayers Association
Camping World
Capital One Financial Corporation
Case New Holland Inc.
Caterpillar Inc.
CBS Corporation
Citigroup
The Computing Technology Industry Association (CompTIA)
Council On State Taxation (COST)
The Cristol Group, Inc.
Darden Restaurants, Inc.
Dave's Gourmet, Inc.
Depository Trust & Clearing Corporation
Dick's Sporting Goods
Digital Media Association
Direct Marketing Association, Inc.
Discovery Communications, Inc.
The Dow Chemical Company
eBay Inc.
EBSCO Industries, Inc.
Fairfax County Chamber of Commerce
FASTSIGNS International
Filemaker, Inc.
Financial Executives International's Committee on Private Company-Policy
Financial Executives International's Committee on Taxation
Financial Services Roundtable
Firehouse Restaurant Group, Inc.
FirstLight HomeCare, LLC
Fischer & Wieser Specialty Foods, Inc.
Foodservice Equipment Distributors Association
Gap Inc.
General Electric Co.
Greater Pittsburgh Chamber of Commerce
Greater Richmond Chamber
Hatco Corporation
Hope Trucking, Inc.
Hovnanian Enterprises, Inc.
HSBC-North America
Huntington-Ingalls Industries, Inc.
Illinois Chamber of Commerce
Imperial Manufacturing
Indiana Bankers Association
Industrial Fasteners Institute
Information Technology Industry Council
International Business Machines Corporation
International Franchise Association
Investment Company Institute
Johnson & Johnson
Keowee Systems, Inc.
Leggett & Platt, Incorporated
Levi Strauss & Co.
Limited Brands, Inc.
LORD Corporation
Louisiana Bankers Association
LTL Service of Wisconsin, Inc.
Macy's, Inc.
Marco's Franchising, LLC
Marich Confectionery
Mary Kay Inc.
Maryland Chamber of Commerce
The McGraw-Hill Companies, Inc.
Media Financial Management
Merck & Co., Inc.
Microsoft Corporation
Montana Chamber of Commerce
Montana Taxpayers Association
Moody's Corporation
Mortgage Bankers Association
Motion Picture Association of America
MPA -- The Association of Magazine Media
MultiState Associates, Inc.
National Foreign Trade Council
National Marine Manufacturers Association
National Restaurant Association
Nationwide Insurance
Nestle Holdings, Inc.
NetChoice
Neutral Posture, Inc.
Newspaper Association of America
New York Bankers Association
North American Association of Food Equipment Manufacturers
Novartis Corporation
Organization for International Investment
Outdoor Living Brands, Inc.
Owner-Operator Independent Drivers Association
PA Chamber of Business and Industry
Partnership for New York City
Pasta by Valente, Inc.
Pinski-Portugal and Associates, Inc.
Poland Springs
PostNet International Franchise Corporation
PulteGroup,Inc.
Purina
QVC, Inc.
Sanofi US
Smithfreld Foods, Inc.
Software Finance & Tax Executives Council
Sony Corporation
Source Atlantique, Inc.
Specialty Equipment Market Association (SEMA)
Sport Clips
Standard Chartered Bank
Stonewall Kitchen LLC
Symantec Corporation
Synopsys, Inc.
TechAmerica
Technology Industry Council
Tennessee Express, Inc.
Texas Bankers Association
Thomson Reuters
303 Products, Inc.
Time Warner Inc.
Trendway
T. Rowe Price Group, Inc.
Tyson Foods, Inc.
UPS
US Bancorp
U.S. Chamber of Commerce
U.S. Council for International Business
Viacom, Inc.
Virginia Bankers Association
Virginia Chamber of Commerce
Walker Information, Inc.
The Walt Disney Company
Washington Technology Industry Association
Wells Fargo
The Wendy's Company
Women Impacting Public Policy
Yum! Brands, Inc.
- Institutional AuthorsCoalition for Interstate Tax Fairness & Job Growth
- Cross-Reference
- Subject Area/Tax Topics
- Jurisdictions
- LanguageEnglish
- Tax Analysts Document NumberDoc 2012-4279
- Tax Analysts Electronic Citation2012 TNT 41-18