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Recently, our firm has noticed several clients have been receiving notices from various states. These notices request the client to complete a nexus questionnaire. We have noticed that clients are being blindsided by a few rogue states that have decided to pass laws to circumvent Public Law 86-272. Clients who thought their activities in a state were protected by federal law are finding that states can circumvent the law as passed by our Congress to impose taxes upon them, when their activities in that state are trivial.
Public Law 86-272, enacted in 1959, was intended to protect companies from unfair taxation. In 1959, Senator Harry F. Byrd of Virginia expressed the Senate''s rationale for the rush in passing a law prior to further study of the issues:
Unless immediate action is taken at this time, it is feared that the States will amend their laws to further encroach upon interstate commerce. - Cong. Rec., August 19, 1959.
It appears to me that Senator Byrd''s fears have come true.
It is my understanding that for the last two to three years a business acitivity simplification act has been introduced in the House of Representatives. It is also my understanding that bills introduced in 2007 and in 2008 have gone nowhere.
In your opinion, do you see any legislative help from Congress related to a bright line test or a simplification of state tax regime to be passed in the near future?
Do you know if there is any pending or current legislation against rogue states that have decided to circumvent the law as passed by Congress?
Actually, with the start of the 2009 legislative session, once again the Business Activity Tax Simplification Act (BATSA) has been reintroduced (Feb. 13, 2009). The reintroduced legislation provides that the protections that apply to multistate taxpayers under P.L. 86-272 with respect to taxes on net income would be expanded to include business activity taxes. The law would prohibit states from imposing business activity taxes on taxpayers unless those taxpayers had physical presence in the state for at least 15 days during the tax year. Protected activities would continue to include solicitations and those activities that are incidental to solicitation activities. Protected activities would also be expanded to include additional activities such as furnishing information or gathering information in a state that is disseminated outside the state. Although the BATSA has not seen much success in past years, the newly introduced legislation leaves the door open. Stay tuned!
Hi Susan, I am interested in knowing why the BATSA failed in prior years and what changes have been made for this session. Could you suggest a good article or where I can find the legislative history or comments surrounding the Act?