I 

108TH CONGRESS 

1ST SESSION H. R. 3220

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

purposes. 

IN THE HOUSE OF REPRESENTATIVES 

OCTOBER 1, 2003

Mr. GOODLATTE (for himself, Mr. BOUCHER, Mr. BOEHNER, Mr. SMITH of 

Texas, Mr. CHABOT, Mr. FORBES, Ms. PRYCE of Ohio, Mr. RAMSTAD, 

Mr. WILSON of South Carolina, Mr. TIBERI, and Mr. BARRETT of South 

Carolina) introduced the following bill; which was referred to the Committee on the Judiciary 

A BILL

To regulate certain State taxation of interstate commerce, 

and for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Business Activity Tax 

5 Simplification Act of 2003’’. 

6 SEC. 2. REMOVAL OF CERTAIN LIMITATIONS ON THE AP7 PLICATION OF PUBLIC LAW 86–272. 

8 (a) SOLICITATIONS WITH RESPECT TO SALES OF

9 OTHER THAN TANGIBLE PERSONAL PROPERTY.—Section 
2

•HR 3220 IH 

1 101 of the Act entitled ‘‘An Act relating to the power of 

2 the States to impose net income taxes on income derived 

3 from interstate commerce, and authorizing studies by con4 gressional committees of matters pertaining thereto’’, ap5 proved September 14, 1959 (15 U.S.C. 381 et seq.) is 

6 amended—

7 (1) in subsections (a) and (c), by striking ‘‘of 

8 tangible personal property’’; and 

9 (2) in subsection (d) by striking ‘‘the sale of, 

10 tangible personal property’’ and inserting ‘‘a sale,’’. 

11 (b) APPLICATION OF PROHIBITIONS TO OTHER BUSI12 NESS ACTIVITY TAXES.—Title I of the Act entitled ‘‘An 

13 Act relating to the power of the States to impose net in14 come taxes on income derived from interstate commerce, 

15 and authorizing studies by congressional committees of 

16 matters pertaining thereto’’, approved September 14, 

17 1959 (15 U.S.C. 381 et seq.) is amended by adding at 

18 the end the following: 

19 ‘‘SEC. 105. Beginning with taxable periods beginning 

20 on or after the first day of the first calendar year that 

21 begins after the date of the enactment of the Business 

22 Activity Tax Simplification Act of 2003, the prohibitions 

23 of section 101 that apply with respect to net income taxes 

24 shall also apply with respect to each other business activity 

25 tax, as defined in section 4 of the Business Activity Tax 
3

•HR 3220 IH 

1 Simplification Act of 2003. A State or subdivision may 

2 not assess or collect any tax which by reason of this sec3 tion the State or subdivision may not impose.’’. 

4 (c) EFFECTIVE DATE OF SUBSECTION (a) AMEND5 MENTS.—The amendments made by subsection (a) shall 

6 apply with respect to the imposition, assessment, and col7 lection of taxes for taxable periods beginning on or after 

8 the first day of the first calendar year that begins after 

9 the date of the enactment of the Business Activity Tax 

10 Simplification Act of 2003. 

11 SEC. 3. JURISDICTIONAL STANDARD FOR STATE AND 

12 LOCAL NET INCOME TAXES AND OTHER BUSI13 NESS ACTIVITY TAXES. 

14 (a) IN GENERAL.—Except as otherwise provided by 

15 this Act, no taxing authority of a State shall have power 

16 to impose, assess, or collect a net income tax or other busi17 ness activity tax on any person relating to such person’s 

18 activities in interstate commerce, unless such person has 

19 a physical presence in the State during the taxable period 

20 with respect to which the tax is imposed. 

21 (b) REQUIREMENTS FOR PHYSICAL PRESENCE.—Ex22 cept as otherwise provided by this Act, for the purposes 

23 of subsection (a), a person has a physical presence in a 

24 State only if such person’s business activities within such 
4

•HR 3220 IH 

1 State include any of the following during the person’s tax2 able year: 

3 (1) Being an individual physically within the 

4 State, or assigning one or more employees to be in 

5 such State, on more than 21 days. However, the fol6 lowing shall be disregarded in determining whether 

7 such 21-day limit has been exceeded: 

8 (A) Activities in connection with a possible 

9 purchase of goods or services for the business. 

10 (B) Gathering news and covering events 

11 for print, broadcast, or other distribution 

12 through the media. 

13 (C) Meeting government officials for pur14 poses other than selling goods or services. 

15 (D) Participation in educational or train16 ing conferences, seminars or other similar func17 tions. 

18 (E) Participating in charitable activities. 

19 (2) Using the services of another person, except 

20 an employee, in such State, on more than 21 days 

21 to establish or maintain the market in that State, 

22 unless that other person performs similar functions 

23 on behalf of at least one additional business entity 

24 during the taxable year. 
5

•HR 3220 IH 

1 (3) The leasing or owning of tangible personal 

2 property or real property in such State on more than 

3 21 days. However, the following shall be disregarded 

4 in determining whether such 21-day limit has been 

5 exceeded: 

6 (A) Tangible property located in the State 

7 for purposes of being assembled, manufactured, 

8 processed, or tested by another person for the 

9 benefit of the owner or lessee, or used to fur10 nish a service to the owner or lessee by another 

11 person. 

12 (B) Marketing or promotional materials 

13 distributed in a State using mail or a common 

14 carrier, or as inserts in or components of publi15 cations. 

16 (C) Any property to the extent used ancil17 lary to an activity excluded from the computa18 tion of the 21-day period under paragraph (1) 

19 or (2). 

20 (c) TAXABLE PERIODS NOT CONSISTING OF A

21 YEAR.—If the taxable period for which the tax is imposed 

22 is not a year, then any requirements expressed in days 

23 for establishing physical presence under this Act shall be 

24 adjusted pro rata accordingly. 

25 (d) EXCEPTIONS.—
6

•HR 3220 IH 

1 (1) DOMESTIC BUSINESS ENTITIES AND INDI2 VIDUALS DOMICILED IN THE STATE.—Subsection (a) 

3 does not apply with respect to—

4 (A) a person (other than an individual) 

5 that is incorporated or formed under the laws 

6 of the State or commercially domiciled in the 

7 State in which the tax is imposed; or 

8 (B) an individual who is domiciled in the 

9 State. 

10 (2) TAXATION OF PARTNERS AND SIMILAR PER11 SONS.—If a taxing authority is not prohibited by 

12 this section from taxing an entity that is a partner13 ship, a Subchapter S corporation, a limited liability 

14 company, a trust, or an estate, or another similar 

15 entity, that taxing authority is also not prohibited by 

16 this section from taxing the owners or beneficiaries 

17 of the entity, if State law imposes the tax not on the 

18 entity itself but on the entity’s owners or bene19 ficiaries, whether or not they are in the State, with 

20 respect to their ownership interest in the entity. 

21 (3) CERTAIN ACTIVITIES.—With respect to the 

22 following, subsection (b) shall be read by sub23 stituting ‘‘one day’’ for ‘‘more than 21 days’’: 

24 (A) The sale within the State of tangible 

25 personal property, where delivery of the prop-
7

•HR 3220 IH 

1 erty originates and is completed within that 

2 State. 

3 (B) The performance of services to real 

4 property within the State. 

5 (4) EXCEPTION RELATING TO CERTAIN PER6 FORMANCES AND SPORTING EVENTS.—With respect 

7 to the taxation of one of the following, subsection (b) 

8 shall be read by substituting ‘‘one day’’ for ‘‘more 

9 than 21 days’’: 

10 (A) A live performance in the State, before 

11 a live audience of more than 100 individuals. 

12 (B) A live sporting event in the State be13 fore more than 100 spectators present at the 

14 event. 

15 SEC. 4. DEFINITIONS. 

16 The following definitions apply in this Act: 

17 (1) NET INCOME TAX.—The term ‘‘net income 

18 tax’’ has the meaning given that term for the pur19 poses of the Act entitled ‘‘An Act relating to the 

20 power of the States to impose net income taxes on 

21 income derived from interstate commerce, and au22 thorizing studies by congressional committees of 

23 matters pertaining thereto’’, approved September 

24 14, 1959 (15 U.S.C. 381 et seq.). 

25 (2) OTHER BUSINESS ACTIVITY TAX.—
8

•HR 3220 IH 

1 (A) The term ‘‘other business activity tax’’ 

2 means—

3 (i) a tax imposed on or measured by 

4 gross receipts, gross income, or gross prof5 its; 

6 (ii) a business licence tax; 

7 (iii) a business and occupation tax; 

8 (iv) a franchise tax; 

9 (v) a single business tax or a capital 

10 stock tax; or 

11 (vi) any other tax imposed by a State 

12 on a business for the right to do business 

13 in that State or measured by the amount 

14 of, or economic results of, business or re15 lated activity conducted in that State. 

16 (B) The term ‘‘other business activity tax’’ 

17 does not include a transaction tax. 

18 (3) STATE.—The term ‘‘State’’ means any of 

19 the several States, the District of Columbia, or any 

20 territory or possession of the United States, and any 

21 political subdivision thereof. 

22 SEC. 5. GENERAL MATTERS. 

23 (a) RULE OF CONSTRUCTION.—The limitation on the 

24 power of a State imposed by section 3 does not affect any 

25 other limitation on that power imposed by other law. 
9

•HR 3220 IH 

1 (b) EFFECTIVE DATE.—This Act applies with respect 

2 to taxable periods beginning on and after the first day of 

3 the first year that begins after the date of enactment of 

4 this Act.

Æ