To regulate certain State taxation of interstate commerce, and for other purposes.

Summary: Business Activity Tax Simplification Act of 2003 - Amends Federal law concerning the taxation of interstate commerce to expand the scope of the protections prohibiting taxation by jurisdictions of the income of out-of-state corporations whose in-state presence is nominal from just tangible personal property to include intangible property and services.

Requires an out-of-state company to have a physical presence in a State before the State can impose franchise taxes, business license taxes, and other business activity taxes.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Business Activity Tax Simplification 
Act of 2003''.

SEC. 2. REMOVAL OF CERTAIN LIMITATIONS ON THE APPLICATION OF PUBLIC LAW 
              86-272.

    (a) Solicitations With Respect to Sales 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 subsections (a) and (c), by striking ``of tangible 
        personal property''; and
            (2) in subsection (d) by striking ``the sale of, tangible 
        personal property'' and inserting ``a sale,''.
    (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 2003, 
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 2003. A State or subdivision may not assess or 
collect any tax which by reason of this section the State or 
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 2003.

SEC. 3. JURISDICTIONAL STANDARD FOR STATE AND LOCAL NET INCOME TAXES 
              AND OTHER BUSINESS ACTIVITY TAXES.

    (a) In General.--Except as otherwise provided by this Act, 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.--Except as otherwise 
provided by this Act, for the purposes of subsection (a), a person has 
a physical presence in a State only if such person's business 
activities within such State include any of the following during the 
person's taxable year:
            (1) Being an individual physically within the State, or 
        assigning one or more employees to be in such State, on more 
        than 21 days. However, the following shall be disregarded in 
        determining whether such 21-day limit has been exceeded:
                    (A) Activities in connection with a possible 
                purchase of goods or services for the business.
                    (B) Gathering news and covering events for print, 
                broadcast, or other distribution through the media.
                    (C) Meeting government officials for purposes other 
                than selling goods or services.
                    (D) Participation in educational or training 
                conferences, seminars or other similar functions.
                    (E) Participating in charitable activities.
            (2) Using the services of another person, except an 
        employee, in such State, on more than 21 days to establish or 
        maintain the market in that State, unless that other person 
        performs similar functions on behalf of at least one additional 
        business entity during the taxable year.
            (3) The leasing or owning of tangible personal property or 
        real property in such State on more than 21 days. However, the 
        following shall be disregarded in determining whether such 21-
        day limit has been exceeded:
                    (A) Tangible 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 a State using mail or a common carrier, or as 
                inserts in or components of publications.
                    (C) Any property to the extent used ancillary to an 
                activity excluded from the computation of the 21-day 
                period under 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 
        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 
                commercially domiciled in the State in which the tax is 
                imposed; or
                    (B) an individual who is domiciled in the State.
            (2) Taxation of partners and similar persons.--If a taxing 
        authority is not prohibited by this section from taxing an 
        entity that is a partnership, a Subchapter S corporation, a 
        limited liability company, a trust, or an estate, or another 
        similar entity, that taxing authority is also not prohibited by 
        this section from taxing the owners or beneficiaries of the 
        entity, if State law imposes the tax not on the entity itself 
        but on the entity's owners or beneficiaries, whether or not 
        they are in the State, with respect to their ownership interest 
        in the entity.
            (3) Certain activities.--With respect to the following, 
        subsection (b) shall be read by substituting ``one day'' for 
        ``more than 21 days'':
                    (A) The sale within the State of tangible personal 
                property, where delivery of the property originates and 
                is completed within that State.
                    (B) The performance of services to real property 
                within the State.
            (4) Exception relating to certain performances and sporting 
        events.--With respect to the taxation of one of the following, 
        subsection (b) shall be read by substituting ``one day'' for 
        ``more than 21 days'':
                    (A) A live performance in the State, before a live 
                audience of more than 100 individuals.
                    (B) A live sporting event in the State before more 
                than 100 spectators present at the event.

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 licence 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 that 
                        State or measured by the amount of, or economic 
                        results of, business or related activity 
                        conducted in that State.
                    (B) The term ``other business activity tax'' does 
                not include a transaction tax.
            (3) State.--The term ``State'' means any of the several 
        States, the District of Columbia, or any territory or 
        possession of the United States, and any political subdivision 
        thereof.

SEC. 5. GENERAL MATTERS.

    (a) Rule of Construction.--The limitation on the power of a State 
imposed by section 3 does not affect any other limitation on that power 
imposed by other law.
    (b) Effective Date.--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.