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Business Reps Call on House to Pass BAT Nexus Bill

FEB. 29, 2012

Business Reps Call on House to Pass BAT Nexus Bill

DATED FEB. 29, 2012
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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.

Sincerely,

 

Abercrombie & Fitch Co.

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.

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