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94–807 PDF 2015

NEXUS ISSUES: LEGISLATIVE HEARING ON 

H.R. 2315, THE ‘‘MOBILE WORKFORCE 

STATE INCOME TAX SIMPLIFICATION ACT 

OF 2015;’’ H.R. 1643, THE ‘‘DIGITAL GOODS 

AND SERVICES TAX FAIRNESS ACT OF 2015;’’ 

AND H.R. 2584, THE ‘‘BUSINESS ACTIVITY 

TAX SIMPLIFICATION ACT OF 2015’’ 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

REGULATORY REFORM, 

COMMERCIAL AND ANTITRUST LAW 

OF THE

COMMITTEE ON THE JUDICIARY 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

FIRST SESSION 

JUNE 2, 2015 

Serial No. 114–26 

Printed for the use of the Committee on the Judiciary 

( 

Available via the World Wide Web: http://judiciary.house.gov 
(II) 

COMMITTEE ON THE JUDICIARY 

BOB GOODLATTE, Virginia, Chairman 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

LAMAR S. SMITH, Texas 

STEVE CHABOT, Ohio 

DARRELL E. ISSA, California 

J. RANDY FORBES, Virginia 

STEVE KING, Iowa 

TRENT FRANKS, Arizona 

LOUIE GOHMERT, Texas 

JIM JORDAN, Ohio 

TED POE, Texas 

JASON CHAFFETZ, Utah 

TOM MARINO, Pennsylvania 

TREY GOWDY, South Carolina 

RAU ́ L LABRADOR, Idaho 

BLAKE FARENTHOLD, Texas 

DOUG COLLINS, Georgia 

RON DeSANTIS, Florida 

MIMI WALTERS, California 

KEN BUCK, Colorado 

JOHN RATCLIFFE, Texas 

DAVE TROTT, Michigan 

MIKE BISHOP, Michigan 

JOHN CONYERS, JR., Michigan 

JERROLD NADLER, New York 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

STEVE COHEN, Tennessee 

HENRY C. ‘‘HANK’’ JOHNSON, JR., 

Georgia 

PEDRO R. PIERLUISI, Puerto Rico 

JUDY CHU, California 

TED DEUTCH, Florida 

LUIS V. GUTIERREZ, Illinois 

KAREN BASS, California 

CEDRIC RICHMOND, Louisiana 

SUZAN DelBENE, Washington 

HAKEEM JEFFRIES, New York 

DAVID N. CICILLINE, Rhode Island 

SCOTT PETERS, California 

SHELLEY HUSBAND, Chief of Staff & General Counsel 

PERRY APELBAUM, Minority Staff Director & Chief Counsel 

SUBCOMMITTEE ON REGULATORY REFORM, COMMERCIAL AND ANTITRUST LAW

TOM MARINO, Pennsylvania, Chairman 

BLAKE FARENTHOLD, Texas, Vice-Chairman 

DARRELL E. ISSA, California 

DOUG COLLINS, Georgia 

MIMI WALTERS, California 

JOHN RATCLIFFE, Texas 

DAVE TROTT, Michigan 

MIKE BISHOP, Michigan 

HENRY C. ‘‘HANK’’ JOHNSON, JR., 

Georgia 

SUZAN DelBENE, Washington 

HAKEEM JEFFRIES, New York 

DAVID N. CICILLINE, Rhode Island 

SCOTT PETERS, California 

DANIEL FLORES, Chief Counsel 
(III) 

C O N T E N T S 

JUNE 2, 2015 

Page 

OPENING STATEMENTS 

The Honorable Tom Marino, a Representative in Congress from the State 

of Pennsylvania, and Chairman, Subcommittee on Regulatory Reform, Commercial and Antitrust Law .................................................................................. 1 

The Honorable Henry C. ‘‘Hank’’ Johnson, Jr., a Representative in Congress 

from the State of Georgia, and Ranking Member, Subcommittee on Regulatory Reform, Commercial and Antitrust Law ................................................. 2 

The Honorable Bob Goodlatte, a Representative in Congress from the State 

of Virginia, and Chairman, Committee on the Judiciacy ................................. 3 

The Honorable John Conyers, Jr., a Representative in Congress from the 

State of Michigan, and Ranking Member, Committee on the Judiciacy ......... 5 

WITNESSES 

Grover G. Norquist, President, Americans for Tax Reform 

Oral Testimony ..................................................................................................... 8 

Prepared Statement ............................................................................................. 10 

Arthur R. Rosen, Partner, McDermott Will & Emery LLP 

Oral Testimony ..................................................................................................... 16 

Prepared Statement ............................................................................................. 18 

Douglas L. Lindholm, President & Executive Director, Council On State Taxation (COST) 

Oral Testimony ..................................................................................................... 27 

Prepared Statement ............................................................................................. 29 

Lawrence F. Leaman, Vice President of Taxes, MASCO Corporation 

Oral Testimony ..................................................................................................... 52 

Prepared Statement ............................................................................................. 54 

Jot Carpenter, Vice President, Government Affairs, CTIA—The Wireless Association 

Oral Testimony ..................................................................................................... 59 

Prepared Statement ............................................................................................. 61 

Julie P. Magee, Chair, Multistate Tax Commission, Alabama Department 

of Revenue 

Oral Testimony ..................................................................................................... 66 

Prepared Statement ............................................................................................. 68 

Dan L. Crippen, Executive Director, National Governors Association 

Oral Testimony ..................................................................................................... 84 

Prepared Statement ............................................................................................. 87 

LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING 

Material submitted by the Honorable Henry C. ‘‘Hank’’ Johnson, Jr., a Representative in Congress from the State of Georgia, and Ranking Member, 

Subcommittee on Regulatory Reform, Commercial and Antitrust Law .......... 97 

Material submitted by the Honorable John Conyers, Jr., a Representative 

in Congress from the State of Michigan, and Ranking Member, Committee 

on the Judiciacy ................................................................................................... 105 

Material submitted by the Honorable Mike Bishop, a Representative in Congress from the State of Michigan, and Member, Subcommittee on Regulatory Reform, Commercial and Antitrust Law ................................................. 120 
Page

IV 

Material submitted by the Honorable Hakeem Jeffries, a Representative in 

Congress from the State of New York, and Member, Subcommittee on 

Regulatory Reform, Commercial and Antitrust Law ........................................ 127 

APPENDIX 

MATERIAL SUBMITTED FOR THE HEARING RECORD

H.R. 2315, the ‘‘Mobile Workforce State Income Tax Simplification Act of 

2015’’ ..................................................................................................................... 136

H.R. 1643, the ‘‘Digital Goods and Services Tax Fairness Act of 2015’’ ............. 142 

H.R. 2584, the ‘‘Business Activity Tax Simplification Act of 2015’’ ..................... 162 

OFFICIAL HEARING RECORD 

UNPRINTED MATERIAL SUBMITTED FOR THE HEARING RECORD

Material submitted by the Honorable Tom Marino, a Representative in Congress 

from the State of Pennsylvania, and Chairman, Subcommittee on Regulatory Reform, Commercial and Antitrust Law 

http://docs.house.gov/Committee/Calendar/ByEvent.aspx?EventID=103540 
(1) 

NEXUS ISSUES: LEGISLATIVE HEARING ON 

H.R. 2315, THE ‘‘MOBILE WORKFORCE STATE 

INCOME TAX SIMPLIFICATION ACT OF 2015;’’ 

H.R. 1643, THE ‘‘DIGITAL GOODS AND SERVICES TAX FAIRNESS ACT OF 2015;’’ AND H.R. 

2584, THE ‘‘BUSINESS ACTIVITY TAX SIMPLIFICATION ACT OF 2015’’ 

TUESDAY, JUNE 2, 2015 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON REGULATORY REFORM, 

COMMERCIAL AND ANTITRUST LAW

COMMITTEE ON THE JUDICIARY, 

Washington, DC. 

The Subcommittee met, pursuant to call, at 10:03 a.m., in room 

2141, Rayburn Office Building, the Honorable Tom Marino (Chairman of the Subcommittee) presiding. 

Present: Representatives Marino, Goodlatte, Johnson, Conyers, 

Farenthold, Issa, Collins, Walters, Ratcliffe, Trott, Bishop, 

DelBene, Jeffries, Cicilline, and Peters. 

Staff present: (Majority) Dan Huff, Counsel; Andrea Lindsey, 

Clerk; (Minority) Slade Bond, Counsel; Norberto Salinas, Counsel; 

and Veronica Eligan, Professional Staff Member. 

Mr. MARINO. The Subcommittee on Regulatory Reform, Commercial and Antitrust Law will come to order. 

Without objection, the Chair is authorized to declare recesses of 

the Committee at any time. We welcome everyone to today’s hearing on Nexus Issues: Legislative Hearing on H.R. 2315, the ‘‘Mobile 

Workforce State Income Tax Simplification Act of 2015;’’ H.R. 1643, 

the ‘Digital Goods and Services Tax Fairness Act of 2015;’’ and 

H.R. 2584, the ‘‘Business Activity Tax Simplification Act of 2015.’’ 

I will now recognize myself for an opening statement. 

I came to Congress with certain core principles that guide my 

work in Washington. One is that we should aim for less government regulation not more. That is why we are pleased to hold this 

legislative hearing. With all the focus on Washington, it is easy to 

forget the burdens that can flow from state capitals. That is especially true when discussing taxation of interstate commerce. 

I am a staunch supporter of states’ rights in the principles of federalism, but I believe states should be sovereign within their bor-
2 

ders only. I have become concerned when states trying to tax or 

regulate beyond their borders. Unfortunately, this is happening 

with greater regularity and it has necessitated the three bills we 

are examining at this hearing. 

Today, employees who travel across state lines for work face a 

myriad of crushing income tax laws. This is true even if they work 

in the state for just a single day. The complexity and variation of 

different state laws places a significant burden on the ability of 

businesses to deploy their workforces. Small businesses, in particular, are especially effected. 

It is also draining on the employees who must hire accountants, 

at their own expense, to handle the paperwork for multiple state 

tax jurisdictions. The Mobile Workforce State Income Tax Simplification Act of 2015 addresses this problem. It creates a bright 

line, 30-day threshold before a state can impose income tax liability 

on a nonresident temporarily working in the state. This minimizes 

compliance burdens on both workers and employers so they can get 

back to work. 

Just as states target nonresident workers for taxation, they also 

target nonresident businesses. An increasing number of states used 

the concept of economic presence to subject nonresident companies 

to state income tax simply because those companies have customers in the state. For example, New Jersey has impounded 

trucks delivering boats to customers in New Jersey, because the 

state demands that out-of-state manufacturers pay income tax to 

New Jersey. Similarly, Massachusetts demands income tax from 

out-of-state businesses if they deliver trucks which carry through 

the state on their own way to businesses from elsewhere. 

The Business Activity Tax Simplification Act, known as BATSA, 

requires an entity to be physically present in the state for more 

than 14 days in a year because it can be subject to state’s business 

activity tax. It also sets a clear guideline on what constitutes a 

physical presence in order to reduce uncertainty. 

The third bill before us is H.R. 1643, the ‘‘Digital Goods and 

Services Tax Fairness Act of 2015.’’ This sets forth the purchase of 

digital goods and services to prevent multiple taxation of cross border sales. 

Every one of these bills is bipartisan. It is a testament to the 

soundness of their policies. I also commend the sponsors of these 

bills, many of whom serve on the Judiciary Committee. I note particularly Mr. Bishop, Ranking Member Johnson, and Mr. Cicilline, 

who are original cosponsors of the Mobile Workforce bill. 

I look forward to hearing from our distinguished panel of witnesses. 

It is now my pleasure to recognize the Ranking Member of the 

Subcommittee on Regulatory Reform, Commercial and Antitrust 

Law, Mr. Johnson of Georgia, for his opening statement. 

Mr. JOHNSON. Thank you, Mr. Chairman. 

Today’s legislative hearing is an opportunity to consider three 

pieces of legislation that would address the divergent patchwork of 

state laws enforcing various tax issues. The Mobile Workforce State 

Income Tax Simplification Act is an important bipartisan bill that 

will help workers across the country and it will also help small and 

multistate businesses. 
3 

Having introduced this bill in both the 110th and 111th Congresses, I am very familiar with this issue. I was pleased to have 

introduced the bill in the last two Congresses with our esteemed 

former colleague from North Carolina, Howard Coble, and I welcome my colleague Congressman Bishop’s leadership on this bill. 

And I look forward to working together on this legislation. 

H.R. 2315 provides for a uniform and easily administrable law 

that will simplify the patchwork of existing inconsistent and confusing state rules. It would also reduce administrative cost to 

states and lessen the compliance burdens on consumers. I urge 

that the Committee move this bill promptly so that it can come to 

the floor for a vote soon. This country’s employees and businesses 

deserve quick action. 

Turning to H.R. 2584, the ‘‘Business Activity Tax Simplification 

Act of 2015.’’ This legislation would establish a physical presence 

standard which must be met before states can impose a business 

activity tax. While proponents of this legislation contend that businesses need more certainty in determining what activities are taxable and that a uniform standard would provide that, others have 

argued that states should determine what activities are taxed within their borders and that a physical presence standard created in 

this bill would invite tax evasion. 

Although I have supported similar legislation in the past, I have 

grown concerned that this bill would prove too costly to states. The 

Congressional Budget Office reported that a substantively identical 

predecessor of this bill would cost about $2 billion in the first full 

year after enactment and that at least that amount in subsequent 

years. We should study whether there are alternative methods 

which accomplish the same goal of providing more certainty for 

businesses while minimizing any impact on our state and local governments, or perhaps revise the bill’s language to dampen its affect 

on state revenues. 

Lastly, H.R. 1643, the ‘‘Digital Goods and Services Tax Fairness 

Act of 2015’’ would prohibit state and local governments from imposing discriminatory and multiple taxation of digital goods and 

services and also establish a tax sourcing framework for the sale 

or use of digital goods and services. I have long supported this bill 

which will promote innovation in sales through a national framework for digital purchases. 

In closing, although I welcome today’s hearing, I also look forward to this Committee addressing the remote sales tax issue. As 

a strong supporter of a level playing field, I have long supported 

the Marketplace Fairness Act. Despite my preference for a legislative hearing on that bill, I welcome any movement toward addressing the remote sales tax issue. 

And with that, Mr. Chairman, I yield back. 

Mr. MARINO. Thank you. 

It is now my pleasure to recognize the Chairman of the full Judiciary Committee, Mr. Bob Goodlatte of Virginia, for his opening 

statement. 

Mr. GOODLATTE. Thank you, Mr. Chairman. 

Good morning and welcome to all of our witnesses. 

The unifying theme of this legislative hearing is ‘‘No Regulation 

Without Representation.’’ 
4 

For much of American history, state’s cross-border reach was 

strictly limited. Until about 1950, states could not tax interstate 

commerce at all. Courts then began to relax the rules. In 1977, the 

Supreme Court held that states may tax interstate commerce if 

there is a ‘‘substantial nexus’’ to the taxing state. 

In the context of sales taxes, ‘‘substantial nexus’’ means a seller 

is physically present in the jurisdiction. The Court, however, has 

never clarified whether the physical presence rule applies to certain other impositions, such as business activity taxes. 

Accordingly, states are increasingly exploiting the gray area in 

the law to tax and regulate beyond their borders. For example, 

California is now requiring that out-of-state farmers who want to 

sell eggs in California comply with California cage-size requirements which are twice the industry standard. The Alabama Attorney General described the new law as ‘‘California’s attempt to protect its economy from its own job-killing laws by extending those 

laws to everyone else in the country.’’ 

This is precisely the sort of protectionism that the commerce 

clause is intended to prevent. It also highlights one of the most pernicious aspects of states taxing and regulating beyond their borders. It permits lawmakers to dodge accountability for the burdens 

associated with their policy choices by shifting them onto nonresidents who cannot hold them accountable at the ballot box. 

Indeed, this Subcommittee heard testimony in 2014 that, if Congress lets ‘‘economic presence’’ rather than ‘‘physical presence’’ becomes the standard, states will mostly exempt resident companies 

from tax obligations while imposing them on out-of-state companies. That is why I am so pleased that Chairman Marino is holding 

this hearing. 

The Business Activity Tax Simplification Act restores physical 

presence, defined as presence for more than 14 days, as a prerequisite to a state imposing business activity taxes. Similarly, the 

Mobile Workforce Tax Simplification Act prevents states from imposing income tax compliance burdens on nonresidents who work 

in the state for less than 30 days a year. 

Critics raise concerns about state sovereignty and revenue loss to 

the states. But a study of the Mobile Workforce bill found it would 

have a de minimis impact on state revenues. In addition, those objections proceed from the incorrect premise that ‘‘economic nexus,’’ 

rather than ‘‘physical presence,’’ is the appropriate touchtone for 

determining whether a state has the authority to tax. In other 

words, these bills do not deprive the states of anything to which 

they have a clear claim. 

Also, before the Committee is the Digital Goods and Services Tax 

Fairness Act of 2015. It sets sourcing rules for the purchase of digital goods and services. These rules will help implement the Permanent Internet Tax Freedom Act’s ban on multiple taxes of Internet 

commerce. This ban expires October 1, of this year and the Committee will soon move to renew it. 

The Committee is also eager to proceed with legislation that levels the playing field between traditional and online retailers without letting states tax and regulate beyond their borders. Productive 

discussions continue. 
5 

These are important issues, and I look forward to the witnesses’ 

testimony. 

Thank you, Mr. Chairman. I yield back. 

Mr. MARINO. Thank you, Chairman. 

It is now my pleasure to recognize the Judiciary Committee 

Ranking Member, Mr. Conyers of Michigan, for his opening statement. 

Mr. CONYERS. Thank you, Chairman Marino and the Members of 

the Committee, and the distinguished witnesses with us today; as 

well as those that are interested enough to come to the hearing 

itself. 

Today’s hearing focuses on three bills dealing with the issue of 

state taxes. And as we consider them, there are several points that 

I would like to present. 

This Committee should first focus on establishing without further delay a national framework that will empower the states to 

enforce collection by remote sellers. Unfortunately, none of the bills 

that are the subject of today’s hearings address the remote sales 

tax dilemma states are currently facing. More than two decades 

ago, the Supreme Court recognized, in the 1992 Quill decision, that 

Congress is best suited to determine whether a remote seller must 

collect taxes, sales taxes. Yet, Congress has failed to make that 

critical determination. 

Although Congress has considered various legislative proposals, 

including during the last Congress when the Senate overwhelmingly passed the Marketplace Fairness Act, the House has not 

taken any meaningful action beyond holding hearings. We owe it 

to our local communities, our local retailers, and state and local 

governments to act this Congress. Otherwise, our local retailers 

will continue to be at a competitive disadvantage and our state and 

local governments will continue to lose critical tax revenues as a 

result of remote sellers not collecting and remitting sales taxes. 

Lost tax revenues mean that state and local governments will 

have fewer resources to provide their residents essential services; 

such as education and police and fire protection. Uncollected sales 

taxes mean fewer purchases at local retailers which translate to 

fewer local jobs. The unfair advantage that remote sellers have by 

not collecting sales taxes hurts us all. Congress should not delay 

any further and it should work to pass bipartisan legislation. I welcome the opportunity to work with the Chair on moving legislation 

this Congress on remote sales tax issues. 

Now, as to H.R. 2315, the ‘‘Mobile Workforce State Income Tax 

Simplification Act of 2015,’’ and H.R. 1643, the ‘‘Digital Goods and 

Services Tax Fairness Act of 2015,’’ both of these measures, although improved over several Congresses, still fail to address the 

needs of all stakeholders. Even though H.R. 2315 incorporates 

much needed improvements reflecting important input from the 

state governments and the business community, the bill still requires further revisions to eliminate its adverse impact on state 

revenues. 

For example, if the bill were enacted as introduced New York 

would lose upwards of $100 million in revenue. Chairman Schumer 

will take note of that, I am sure. Similarly, the sponsors of H.R. 
6 

1643 must work with the state and local governments to draft language all parties can find agreeable. 

Ms. Magee and Mr. Crippen likely will have suggestions to address the state and local government’s concerns with both of the 

bills. 

And finally, H.R. 2584, the ‘‘Business Activity Tax Simplification 

Act of 2015,’’ is thoroughly flawed legislation especially in light of 

the fact that it overrides the authority of states to determine how 

and what they tax within their own borders. The bill upends longsettled state tax practices by implementing a standard falsely 

based on physical presence and by including loopholes that make 

such a standard meaningless for state governments. 

The bill favors big multistate corporations at the expense of 

small and local businesses. It encourages tax evasion by creating 

opportunities for nationwide businesses to structure corporate affiliates and transactions to avoid paying their fair share of local 

taxes. 

The bill prevents states from imposing business activity taxes on 

businesses which have less than 15 days of physical presence within the state. This will shift the state corporate income tax burden 

onto local small businesses, manufacturers, and service providers; 

in other words, the types of businesses that pay local property and 

payroll taxes. And the measure will eviscerate state revenues with 

respect to nearly identical legislation considered several years ago. 

The Congressional Budget Office estimated that it would reduce state revenues by about $2 billion in the first full year following 

enactment and at least that amount in subsequent years and that 

it would generate even greater future state tax revenue losses as 

corporations avail themselves of the bill’s virtually unenforceable 

standard and vast loopholes. We should not be forcing upon the 

states a $2 billion decrease in their tax revenues. Accordingly, I 

urge my colleagues to seriously consider scrapping the Business Activity Tax Simplification Act and let us start all over again. 

Thank you, Mr. Chairman. 

Mr. MARINO. Thank you. 

Without objection, all the Member’s opening statement will be 

made part of the record. 

We have a very distinguished panel with us today, and I will 

begin by swearing in our witnesses before introducing them. 

So would you please rise and raise your right hand please? 

Do you swear that the testimony you are about to give is the 

truth, the whole truth, and nothing but the truth so help you God? 

Let the record reflect that the witnesses have responded in the 

affirmative. 

Thank you. Please be seated. 

I will introduce the witnesses for today. Grover Norquist is President of Americans for Tax Reform, ATR; a taxpayer advocacy group 

he founded in 1985. ATR works to limit the size and cost of government and opposes higher taxes at the Federal, state, and local levels. It supports tax reform that moves toward taxing consumed income one time at one rate. Mr. Norquist serves on the board of several organizations and has served in many capacities and has 

served, also, in government capacity as well; such as the Advisory 

Commission on Electronic Commerce and as commissioner for the 
7 

National Commission on Restructuring the IRS. Mr. Norquist holds 

both an undergraduate degree in economics as well as an MBA 

from Harvard University. 

Welcome, Mr. Norquist. 

Mr. NORQUIST. Thank you very much. 

Mr. MARINO. I am going to introduce everybody and then we’ll 

get back to you. 

Mr. Rosen is a partner in global law firm of McDermott Will & 

Emery LLP. His practice focuses on tax planning and litigation related to state and local tax matters for corporations, partnerships, 

and individuals. Mr. Rosen has held executive tax management positions at Xerox Corporation, AT&T, and he also advised the State 

of New York as a tax counsel. Mr. Rosen is a fellow of the American College of Tax Counsel and is listed in the Best Lawyers in 

America. Mr. Rosen has an undergraduate degree from NYU, a 

master’s degree from Rensselaer Polytechnic Institute and a JD 

from St. John’s University School of Law. 

Mr. Douglas L. Lindholm. 

Am I pronouncing that correctly, sir? 

Mr. Lindholm is president and executive director of the Council 

on State Taxation, otherwise known as COST. Mr. Lindholm’s prior 

experience includes serving as State Tax Policy Council for the 

General Electric Company. He also worked in the Washington National Tax Service Office of Price Waterhouse LLP. In 2006, Mr. 

Lindholm was named the Tax Business 50 list of most influential 

tax professionals around the globe. He is also the recipient of the 

2009 New York University Award for Outstanding Achievement in 

State and Local Taxation. He holds a JD from American University’s Washington College of Law and a BA in accounting from 

Lynchburg College. 

Mr. Leaman has served as Masco’s vice president of tax since 

September 2012. Mr. Leaman is responsibly for Masco’s multinational tax matters including all mergers and acquisitions and 

represents Masco in the company’s tax-related government affairs 

matters at both the Federal and state level. Due to his leadership 

role in tax, real estate, and government affairs, he frequently provides strategic guidance to senior Masco management including the 

CEO and the CFO. Mr. Leaman received his undergraduate degree 

from the Michigan State University and a master’s degree in taxation from Walsh College. 

Mr. Leaman, welcome. 

Jot Carpenter began working for CTIA in 2006 and is responsible 

for strategic direction in day-to-day management of the association’s outreach efforts to Members of Congress and other government agencies. Prior to joining CTIA, Mr. Carpenter worked in the 

Washington Office of AT&T. Mr. Carpenter has also worked for 

Telecommunications Industry Association and served as a legislative assistant to Congressman Mike Oxley. Mr. Carpenter has an 

undergraduate degree from Michigan—excuse me, Miami University in Ohio. He holds one master’s degree in history from the 

Bowling Green State University and another in telecommunications from George Washington University. 

Welcome. 

Commissioner Julie Magee—am I pronouncing that correctly? 
8 

Ms. Magee was appointed to the State Revenue Commissioner for 

the State of Alabama by Governor Robert Bentley on January 18, 

2011. Prior to her appointment, Ms. Magee was vice president of 

the INS Trust Insurance group based in Mobile, Alabama. During 

her tenure as State Revenue Commissioner, Ms. Magee has served 

on the board of the Federation of Tax Administrators, FTA, and as 

chair of the multistate commission, NTC. She has also held other 

positions in several important organizations. Commissioner Magee 

is a graduate of the University of South Alabama. 

Mr. Crippen serves as the executive director of the National Governors Association or the NGA. Prior to his work at NGA, Mr. 

Crippen served as the director of the Congressional Budget Office 

from 1999 to 2002. Mr. Crippen has worked in the private and nonprofit sectors primarily on health care and is now a board member 

of several health care related organizations. He also served as the 

chief council and economic advisor for then Senate Majority Leader, Howard Baker. Mr. Crippen has an undergraduate degree from 

the University of South Dakota; he also holds a master’s degree 

and a Ph.D. from the Ohio State University in public finance. 

Welcome, sir. 

Each of the witness written statements will be entered into the 

record in its entirety. I ask that each witness summarize his or her 

testimony in 5 minutes or less. To help you stay within the time, 

there is a timing light in front of you. The light will switch from 

green to yellow, indicating that you have 1 minute to conclude your 

testimony. When the light turns red, it indicates that the witness’ 

5 minutes have expired. And I know that we are so, and you are 

so, intent on making your statements and we really don’t pay attention to the lights. We don’t pay attention to them up here. So, 

what I am going to do is diplomatically just give a little tap to let 

you know that your time has expired and could you please wrap 

it up quickly. 

Thank you. 

Okay. The Chair now recognizes Mr. Norquist for his 5-minute 

statement. 

TESTIMONY OF GROVER G. NORQUIST, PRESIDENT, 

AMERICANS FOR TAX REFORM 

Mr. NORQUIST. Okay? Thank you. 

Grover Norquist from Americans for Tax Reform. Thank you, 

Chairman, the Ranking Member. 

One of the challenges we have in taxation is that politicians love 

to tax people who can’t vote against them. The British did this and 

it caused them some trouble, but in the states people like to try 

and tax people who live in other states and can’t vote against them 

or people who fly into their town briefly and leave and don’t vote 

and don’t make campaign contributions. And that’s a challenge because, one, it violates the whole concept of taxation without representation and it doesn’t allow any sort of tax; it undermines tax 

competition between the states. It is what keeps state taxes more 

reasonable than they’d otherwise be and efforts to allow people to 

tax across state lines, such as taxing online sales, businesses in a 

different state on the other side of the country allows you to tax, 
9 

audit, harass a business who cannot vote against you and its employees cannot vote against you, and it’s safe to beat up on them. 

I’ve heard some conversation about states’ rights. States don’t 

have rights. States don’t have rights. People have rights. States exercise power. It’s often abused against the people in their state. 

That’s not a good thing, but we ought to limit that abuse to people 

in the state. They can raise the taxes on the people who live and 

work in the state. But, to export that tax to other people to reduce 

the opposition to tax increases is problematic. The bills put forward 

today, a number of them they make very good progress in that direction to make sure that the taxpayers are not whacked repeatedly by different taxing entities and by places that they can’t vote 

on the political leaders who impose those higher taxes. 

I’m certainly here to endorse and support H.R. 1643, the ‘‘Digital 

Goods and Services Tax Fairness Act of 2015;’’ H.R. 2315, the ‘‘Mobile Workforce State Income Tax Simplification Act of 2015;’’ and 

H.R. 2584, the ‘‘Business Activity Tax Simplification Act of 2015.’’ 

All three begin the process of making it more difficult for politicians to export taxes onto people who do not have a voice in their 

elections. 

The discussion that Chairman Goodlatte has put forward on Hybrid Origin I think is a very good start. Origin sourcing rather than 

allowing states, where states only talk to taxpayers in their own 

state instead of going after taxpayers and businesses and individuals in other states, is a very good discipline on potential abuses 

by state and local governments. Cities and states that have taxed 

their citizens and their businesses so badly that they fled to other 

states are now looking for a way to throw a harpoon into those that 

have escaped and try and drag back tax dollars. That has to stop. 

These are important steps in the right direction. 

There have been efforts in the past by states and cities that have 

so abused their citizens they’ve left that they want to be able to 

figure out how to tax them anyway. Those efforts, such as the Fairness Act, which is neither fair, to allow people to tax across state 

lines and to empower states to do that are moving in the wrong direction. The series of suggestions here move in the right direction. 

I would also add one that either you might be looking at in the 

future or the transportation department, but H.R. 1528, the End 

Discriminatory State Taxes for Automobile Renters, introduced by 

Representative Sam Graves and Steve Cohen. That’s one that bans 

Discriminatory Taxes on car rentals. If you rent a car from an airport, you know that the local politicians love to lard it up with lots 

of taxes because you’re just flying into the city and leaving. You’re 

not going to be voting on them, but people do that and, depending 

on whichever city or state you’re going into, you get whacked with 

a whole bunch of discriminatory taxes forbidding that interference 

with interstate commerce as we do with other methods of transportation falls into the category of what you’re working on here. And 

I think I would recommend as an important of legislation. 

Thank you. 

[The prepared statement of Mr. Norquist follows:] 
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Mr. MARINO. Thank you. 

The Chair now recognizes Mr. Rosen. 

TESTIMONY OF ARTHUR R. ROSEN, PARTNER, 

McDERMOTT WILL & EMERY LLP 

Mr. ROSEN. Mr. Chairman, Members of the Committee, BATSA, 

H.R. 2584, addresses a major problem facing American businesses 

today, and that is states imposing tax on businesses that aren’t in 

the state. In effect, states are taxing activities that occur outside 

their borders. States have taken two avenues to achieve that goal. 

One is to assert the concept of economic nexus and the other is to 

try to get around a Federal law enacted in 1959 and that is Public 

Law 86-272. Economic nexus is the assertion by a state that if an 

out-of-state business has customers within its borders, then that 

state has a right to impose tax on the out-of-state business. 

P.L. 86-272, the 1959 law, was supposed to be a temporary law. 

And the Willis Commission was impaneled by Congress to look at 

this issue. And the Willis Commission came out with a report that 

said states should have a physical presence requirement and also 

states should have their apportionment in a uniform manner 

around the country. While neither has happened, states have gone 

in the opposite direction. So the need for that law is even greater 

today than it was in 1959. 

Now, BATSA addresses the economic nexus argument, as you’ve 

heard, by establishing a physical presence test. A company must 

have employees or property in the state for more than 14 days during the year before the state may impose its direct tax on that business. Also, 86-272 would be modernized to meet the new economy. 

Now, those who support BATSA do so for the following reasons. 

Those people believe that tax should be paid to jurisdictions that 

are furnishing benefits and protections to a taxpayer, not to somebody outside. And states respond by saying, ‘‘Well, we’re maintaining a marketplace for you, out-of-state seller. We’re maintaining a 

civilized society so you can sell to our people. Therefore, you should 

pay us for that.’’ 

But I would hope, and I think everybody here would hope, that 

elected officials do things for people within their borders; their constituents. They’re not maintaining a market for outside businesses. 

People in the state get those benefits. 

Another reason that physical presence is correct is because income should be taxed where earned. We all know that income is 

earned where labor and capital is employed. If you were to work 

at home, suppose you telecommute or you have a consulting business in your home in Virginia, and you work very hard, you buy 

some equipment that you use for word processing and research, 

and you find a customer in Utah or you’re telecommuting your employer is in Utah, you work every day in Virginia. Where do you 

earn your income? Where your customer is? In Utah? Of course 

not. You earn your income where you expend your labor and your 

capital. 

So when states say, ‘‘Well, markets are important. There’s no 

sale, there’s no profit.’’ 

That sounds nice, a nice sound byte. But you really earn your income where you expend your labor and your capital. 
17 

Next, BATSA would help American businesses compete against 

foreign businesses. That’s because, as a practical matter, states 

have no way of enforcing economic nexus against companies that 

have no presence in the United States. We’ve seen a couple of 

states pull back from even attempting to tax foreign businesses 

while they continue their attack on American businesses. 

Next, the United States and every other country that has entered 

into a tax treaty in the world has this idea of a permanent establishment in there. And that is similar to what BATSA does, but 

BATSA is much more generous to the taxing officials than even the 

treaty permanent establishment concept is. 

Now, those who are generally against this is executive branch of 

state governments. The NCSL has not voiced any opposition. As a 

matter of fact, the NCSL several years ago passed a resolution supporting the principles in BATSA. So the executive branch has a lot 

of complaints. They say, first of all, current law allows us to tax 

out-of-state businesses. Well, that’s not exactly true. 

The U.S. Supreme Court has never ruled on this case; has never 

looked at the commerce clause issues. It denied my cert petition in 

MBNA; the following year, it denied a cert petition in Cap One. A 

court has probably been at Congress to decide how to regulate this 

area. This is not Federal intrusion. This is what interstate commerce is all about. That’s why we have a Constitution instead of 

the Articles of Confederation, to make sure we have one economy, 

that states do not set up barriers. And so this is Congress’ role to 

regulate interstate commerce, to make sure that tax is done correct. 

People say this tool could be used for tax sheltering, tax avoidance, tax shifting. The bill has a specific provision that prevents 

companies from doing that, it gives states all the rights they have 

to fight tax shams and close down loopholes. 

Finally, a question was raised: Where is this cost going to come 

from if, in fact, this is cost $2 billion to the states if BATSA were 

enacted? Well, an independent study showed that this was less 

than 5 percent of total business tax collections that states get. Second, maybe the taxes should come from businesses and people in 

the jurisdiction that are receiving the benefits and protections of 

that government. 

Thank you. 

[The prepared statement of Mr. Rosen follows:] 
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Mr. MARINO. Thank you, sir. 

Mr. Lindholm? 

TESTIMONY OF DOUGLAS L. LINDHOLM, PRESIDENT & 

EXECUTIVE DIRECTOR, COUNCIL ON STATE TAXATION (COST) 

Mr. LINDHOLM. Thank you, Chairman Marino, Ranking Member 

Johnson, and Members of the Committee. 

My name is Doug Lindholm. I’m the President, Executive Director of the Council on State Taxation, also known as COST. I am 

here today representing COST and the 275-member Mobile Workforce Coalition in favor of H.R. 2315. 

First, I’d like to thank Congressman Bishop and Ranking Member Johnson for introducing that legislation this year. This is the 

ninth year that we’ve been working on this issue, and Congressman Johnson has been with us from the get-go. And I thank you, 

sir, for your leadership on this issue. 

The issue is how to simplify the patchwork of state personal income tax laws that face any employee who travels for work across 

state borders and, two, their employers who also have an associated withholding requirement on that income. Every day, hundreds 

of thousands of employees across the U.S. are sent by their employers to work in states where they don’t reside. Most of these trips 

are temporary in nature. That is, you leave your resident state, you 

go to a nonresident state, and you’re back to your resident state. 

Currently, every state has that has a personal income tax has 

different rules for when an employee, one, has to file a personal income tax and, two, when their employers has to withhold on that 

income for the state. 

Exhibit B, in my testimony, has a very instructive map that 

shows you the variation across the states. And this doesn’t just affect business either. It affects all employees and employers, private 

sector and public sector alike. It affects all businesses large and 

small, it affects non-profit organizations, unions, teachers, state 

employees, the utility crews that come from neighboring states to 

help get the lights back on after a natural disaster. They can trigger this personal income tax filing requirement. And let me tell 

you, they have a lot more to think about than filing a nonresident 

return. It even applies to Departments of Revenue and Congressional staffers. 

There is precedent for this legislation in this body. Congress has 

already recognized and protected from this patchwork of state laws. 

Industries that are highly mobile; Merchant Mariners, railroad 

workers, airline workers, motor carrier employers, members of the 

military, groups that are highly mobile are protected from this 

patchwork by Congress. Remember, this issue affects all employees 

who travel for work and creates a huge administration and compliance burden that is absolutely unnecessary. 

The solution in H.R. 2315 is a pragmatic, effective solution to 

this problem. It just provides a 30-day threshold for temporary 

work assignments and until that 30 days is met, the employee remains fully taxable in his or her resident state. 

Now, admittedly there is currently widespread non-compliance in 

this area. But the truth is nobody could live with full compliance. 

State Departments of Revenue would be absolutely overwhelmed 
28 

by this small dollar returns if everybody was in full compliance 

here. And since the majority of business trips in the country today 

are less than 30 days, if this bill were enacted, instantly hundreds 

of thousands of traveling employees would be brought into compliance and they would not have to do a thing. 

Now, what is untenable about the current situation is that if a 

state does start looking around and find a noncompliance in this 

area, it raises the specter or the perception of selective enforcement. And when you have selective enforcement, it tends to undermine the faith and credibility of our entire tax system. It is entirely 

appropriate that Congress act here. This is an administrative fix 

to a very different problem, one that cannot be fixed by the states 

themselves because of the out-of-state component here. 

I want to commend the Multistate Tax Commission. They have 

developed a model act of their own and we helped them. It was 

adopted in 2011, but since then only one state, North Dakota, has 

adopted it. And it’s only effective unless other state win-win and 

with other states adopted. And it is because this needs concerted 

effort to resolve this problem that this body is the only body that 

can take action. 

One issue, you know, I am happy to take question on the specifics of the bill. One part of the bill I’d like to elaborate on, and 

that is the fact that the employer can rely on the employee’s determination of time spent in nonresident state. For that purpose, 

that’s only for purposes of levying penalties. The amount of withholding is still based on the actual time of the state. I think there 

has been some misunderstanding of that in the past that has been 

changed and corrected. 

One other aspect, the bill does not cover professional athletes, 

professional entertainers, and certain public figures of national 

prominence who are paid on a per event basis. This Committee 

passed this legislation nearly identical on voice vote during the 

112th Congress. We respectfully ask, on behalf of COST and the coalition, to support the speedy adoption of H.R. 2315. 

Thank you. 

[The prepared statement of Mr. Lindholm follows:] 
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Mr. MARINO. Thank you. 

The Chair now recognizes Mr. Leaman. 

TESTIMONY OF LAWRENCE F. LEAMAN, 

VICE PRESIDENT OF TAXES, MASCO CORPORATION 

Mr. LEAMAN. Mr. Chairman, Ranking Member Johnson, and 

Congressman Bishop, I’d like to thank you for the opportunity to 

testify today on behalf of H.R. 2315. As the vice president of Taxes 

for Masco Corporation, which is the member of the coalition, we 

have been active members of the coalition primarily to see enactment to this legislation through enactment. And I’m here today to 

testify to be able participate in a rare opportunity to move truly 

widespread bipartisan legislation through the Congress. 

Masco Corporation is headquartered in Taylor, Michigan. It’s one 

of the largest manufacturers of brand-name products for the home 

construction industry and remodeling. We have Delta Faucets, 

Behr Paint, KraftMaid and Merillat Cabinets, Milgard Windows, 

Caldera Hot Spring and Spas; as well as we install products for the 

home, as well as install insulation in the new home construction 

market. Our workforce includes many employees that travel across 

state lines that which include our sales force; which includes installers for cabinets, installers of insulation, as well as employees 

who provide support to the big boxes, in particular Home Depot 

and Lowes. 

We have a workforce of over 23,000 people in the United States. 

I would say at least 40 percent of those employees would qualify 

as mobile workers. Therefore, a large portion of our workforce we 

had have to track. 

We have a tremendous representation from the subcommittee of 

our employee base. Chairman Marino’s district in Sayre, Pennsylvania has over 700 employees with Masco cabinetry. The 560 employees in Vista, California of Congressman Issa’s district. We have 

a BrassCraft headquartered in Novi, Michigan, Representative 

Trott’s district. And we have over a thousand individuals employed 

in the State of Washington State, of Congresswoman DelBene. 

The problem. You know, Masco Corporation as most large corporation make every effort to comply with tax laws and regulations. And it’s a tremendous burden and it takes tremendous resources for us to accomplish that. Masco has a long history of being 

transparent in working with taxing authorities in a way to move 

forward the process. 

The management of the workforce that we’re referring to today 

does not come under my responsibility. You know, marketing, HR, 

sales, but oftentimes I’m consulted because of the tax matters that 

they’re faced with. People often ask me what am I faced—what 

keep me up at night and Sarbanes-Oxley, which is effectively referred to as Sox is one of my, you know, biggest concerns. And 

when you look at the administration of a workforce, 40 percent 

where they are traveling across state lines, you know I’m never assured of the fact of when a problem might arise that cause me Sarbanes-Oxley’s issues. 

Just to give you a couple of examples of what we’re faced with, 

you know, we have, as I indicated, a workforce that travels across 

state lines. And when we take an example of our installation serv-
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ice group, we have 7,000 employees that work in that group and, 

yet, we file 10,500 W-2s on behalf of that workforce primarily attributable to the fact that these individuals cross state lines. 

Another issue, albeit an extreme example, but we had one individual who, because of crossing state lines and moving into different municipalities in one given year, had 50 W-2s. So if you can 

envision an individual who makes something less than $50,000 a 

year and at the end of the year is faced with filing his tax return, 

it’s undaunting. And to highlight that issue, he would be or others 

required to go out and hire tax professionals at a cost that oftentimes they cannot afford. And yet, it’s not uncommon. It’s quite frequent that we receive calls from these CPA’s, tax professionals, 

asking us, in terms of how to administer these tax laws and what 

opportunities might we be able to do to mitigate the costs to these 

individuals. 

So as we’ve talked about, this is a tremendous administrative 

burden on both not just the employer but on the employee as well. 

And again, referring to the simplicity of, I think, the tax legislation that we’re putting forth, it’s an administrative fix where we 

are not doing anything to adjust or deflect the proper tax reporting 

of income. It’s merely administratively expedient on behalf of all 

parties whether it is the corporations, individuals, government taxing authorities, it’s a relief. So I’m here to encourage the Subcommittee to report this out to the full Congress. 

Thank you. 

[The prepared statement of Mr. Leaman follows:] 
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Mr. MARINO. Thank you. 

Mr. Carpenter? 

TESTIMONY OF JOT CARPENTER, VICE PRESIDENT, 

GOVERNMENT AFFAIRS, CTIA—THE WIRELESS ASSOCIATION 

Mr. CARPENTER. Chairman Marino, Ranking Member Johnson, 

and Members of the Subcommittee, thank you very much for the 

opportunity to testify in support of the Digital Goods and Services 

Tax Fairness Act. My name is Jot Carpenter and I serve as vice 

president of Government Affairs for CTIA, the Wireless Association, though I’m here today on behalf of the Download Fairness Coalition. CTIA is a member of the DFC, a group of 29 companies and 

organizations whose unifying principle is the belief that the Internet economy requires a consistent national framework to guide the 

way that states and localities exercise their right to tax digital 

products and services. 

That consistent national framework is embodied in H.R. 1643, 

sponsored by your colleagues Lamar Smith and Steve Cohen, whom 

we thank for their leadership and commitment to addressing our 

concerns. The Smith-Cohen bill achieves the objective we seek 

while embodying basic principles of fairness for consumers and 

those like CTIA’s members that effectively service the agents of the 

states. All while avoiding the imposition of any new taxes and respecting each state’s determination on how or if to tax digital products. It is framework that only Congress can enact to provide the 

certainty, stability, and safeguards needed to keep the digital economy a thriving part of our overall economy. 

At its core, the bill seeks to achieve two equally important objectives. First, it seeks to preclude multiple jurisdictions from claiming the right to tax the same transaction by clearly assigning one 

jurisdiction, the customer’s home jurisdiction, the authority to impose taxes on digital goods. Second, it seeks to preclude discriminatory taxation of such commerce to ensure that digital goods are 

taxes at the same rates and under the same rules that apply to 

physical goods. 

Now, with respect to the first of these objectives, H.R. 1643 

draws upon the successful model that this Committee created 15 

years ago for wireless and voice services. The Mobile Telecommunications Sourcing Act established a successful national framework to 

guide how state and local jurisdictions may tax wireless voice services eliminating the chance of double taxation while simplifying 

carrier administration and end user bills. 

The MTSA has proven durable and effective, and it offers a fine 

model for how digital products should be treated. But as was the 

case with wireless voice 15 years ago, Congressional action is needed because the states and localities have neither the ability nor the 

Constitutional authority to create the necessary framework on 

their own. 

With respect to the second of our objectives, H.R. 1643 establishes the simple principle that digital goods should not be subject 

to discriminatory taxation. The discriminatory taxation of communication services and digital commerce has been widely acknowledged as problematic since the Advisory Commission on Electronic 

Commerce, on which Grover served, delivered its report during the 
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Clinton administration and increasingly the digital nature of our 

economy demands a solution to this inequity. 

There is no reason why this summer’s beach reading should be 

taxed differently if it is downloaded to a Kindle or a tablet that if 

it is purchased in paperback at the local drug store. And H.R. 1643 

will ensure that digital and physical goods are subject to the same 

treatment. While it is proper to leave to the states the decision 

about whether and at what level to tax these goods, it is a completely reasonable exercise of Congressional authority to prevent 

discrimination among them. 

The important nondiscrimination provisions of H.R. 1643 also 

complement other bills before the Committee; such as the Goodlatte-Eshoo Permanent Internet Tax Freedom Act and the forthcoming Lofgren-Franks Wireless Tax Fairness Act. H.R. 1643 and 

those bills will move us away from a tax system designed for the 

long-passed days of Ma Bell and instead align our telecom system 

with the age of the smartphone and mobile broadband. Today’s information economy deserves no less. 

Mr. Chairman and Members of the Subcommittee, thank for this 

opportunity to testify in support of H.R. 1643. I hope the Committee and the House will approve the bill at the earliest possible 

date. 

Thank you. 

[The prepared statement of Mr. Carpenter follows:] 
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Mr. MARINO. Thank you, sir. 

The Chair now recognizes Commissioner Magee. 

TESTIMONY OF JULIE P. MAGEE, CHAIR, MULTISTATE TAX 

COMMISSION, ALABAMA DEPARTMENT OF REVENUE 

Ms. MAGEE. Good morning. 

Thank you, Chairman Marino and Ranking Member Conyers and 

Members of the Subcommittee. My name is Julie Magee and I am 

the Alabama Commissioner of Revenue. I am also the chair of the 

Multistate Tax Commission, as well as secretary of the Board of 

Trustees for the Federation of Tax Administrators. And it is in my 

capacity in these organizations today that I’m here. On behalf of 

them and all of the states that participate, I would like to say we 

greatly appreciate this opportunity and hope that our testimony 

here, which is provided in more detail in written form, is helpful. 

The Subcommittee is considering legislation that would have a 

substantial impact on state taxing systems, tax administration, and 

enforcement. We realize there are always going to be those who 

would like Congress to regulate state taxation. That is why we appreciate the fact that this Committee and Congress in general has 

been very cautious over the years in responding to these calls for 

Federal involvement. 

I just want to briefly point out the most critical problems these 

bills present. That obviously means that I will be focusing on the 

negatives, and I apologize. But we hope that it helps this Committee understand why we oppose these bills. 

First, let me address the Mobile Workforce State Income Tax 

Fairness and Simplification Act. This bill restricts state imposition 

of income state and tax withholding on wages for nonresident employees working in the states. Just like every major country that 

has an income tax including this one, states impose income tax on 

nonresidents. Those nonresidents then get to take a credit against 

taxes imposed by their home country or state. This bill would prevent states from taxing any employee that is in the state for less 

than 6 weeks regardless of how much that employee makes. This 

bill also essentially makes employer withholding and recordkeeping 

voluntary for many nonresident workers. 

For my role as a tax administrator and any other tax commissioner will tell you, including the head of the IRS, that having employers withhold taxes on wages and keep records is the key mechanism to making our income tax system function. We understand 

that it wouldn’t be reasonable to require withholding for nonresident employees who are only in a state for a few days during 

the year. That’s why revenue departments rarely, if ever, make an 

issue out of it. 

At the Multistate Tax Commission, we recognize that there was 

a potential issue for some employers and we developed a model law 

which we have recommended to the states. It would impose a 20- 

day threshold, would not apply to high wage employees, would require employer recordkeeping, but would not require withholding 

for less than 20 days. And we’ve said this publically many times 

before. We would be happy to join hands with industry and go to 

our state legislatures and get this model law enacted. 
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The second bill I want to address is the Digital Goods and Services Tax Fairness Act. This bill is very complex and has been studied by our organization and others. As for the special protections 

in this bill, I would just note that states have not taxed digital 

goods and services more than other products. If anything, they’ve 

taxed them much less. But, more important is the effect of the 

sourcing rules. Congress has imposed a uniform sourcing rule on 

a state sales tax once before and the area of mobile telecommunication services called the Mobile Telecommunications Sourcing Act. 

Both that act and this bill basically say that only one state can 

tax the sale of something; generally the destination state. But unlike the Mobile Telecom Act, this bill does not grant the destination 

state the authority to require collection of the tax from a seller that 

doesn’t have physical presence in the state. And as you know, that 

the states can’t collect tax from remote sellers like Internet sellers 

has become a huge problem for the states. 

If the bill prevents the origin state from taxing the sale and 

doesn’t grant the destination state the authority to do so, then 

most sales of digital products will escape any tax. 

Finally, and most importantly, I want to express our deep concerns for the Business Activity Tax Simplification Act. This bill has 

been around a long time. And as you know, the National Governors 

Association has said that the CBO’s office estimate of the physical 

impact on the states which could be $2 to $3 billion for the first 

year is just the tip of the iceberg. No state that imposes a business 

or corporate income tax doubts that they will see substantial erosion of the tax base if this bill were to be enacted. 

This bill creates a tax-free zone for big, multistate, multinational 

companies and allows them to use tax strategies to shift income as 

to avoid state taxes all together. What this means is that mostly 

smaller, domestic, local businesses that can’t lower their taxes by 

engaging in income shifting will ultimately be at a disadvantage. 

And from an administrative standpoint, it also means the states 

are at a disadvantage because the main problems of enforcement 

in the business tax area are coming up in the context of these big 

multinational entities which have great resources to engage in tax 

planning and are located at other parts of the country or the world. 

As with the Mobile Workforce bill, the commission is also recognized that there could be an issue here, especially for the smaller 

businesses. So again, the commission has proposed a solution in 

the form of a model act that creates a responsibility file only when 

a business exceeds a certain amount of sales into the state. A few 

states have enacted this model already. Tennessee did so most recently. 

Again, we’ll be more than happy to go to the state legislatures 

and promote this legislation. 

Yes, sir. 

[The prepared statement of Ms. Magee follows:] 
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Mr. MARINO. Thank you. 

Ms. MAGEE. Thank you. 

Mr. MARINO. Mr. Crippen? 

TESTIMONY OF DAN L. CRIPPEN, EXECUTIVE DIRECTOR, 

NATIONAL GOVERNORS ASSOCIATION 

Mr. CRIPPEN. Chairman Marino, Ranking Member, so I hear is 

Mr. Johnson, Members of the Subcommittee; I am pleased to appear on behalf of the National Governors Association. 

Mr. Chairman, I want to begin with—— 

Mr. MARINO. Sir, could you please pull your mike a little closer 

if it is not on? 

Mr. CRIPPEN. Sure. 

Does that work? 

Mr. MARINO. Much better. 

Mr. CRIPPEN. Okay. 

I want to begin where I will end by saying that it’s unfortunate 

the Subcommittee was unable to formally discuss the tax issue of 

greatest importance to the states: The need to create parody between in-state and out-of-state retailers regarding the collection of 

state and local sales taxes. Governors maintain that before any 

Federal legislation regarding state taxation is passed, Congress 

should first address this disparity. 

Let me start with the bills at hand. First, the Mobile Workforce 

State Income Tax Simplification ACT. NGA has simply not taken 

a position on H.R. 2315. Unfortunately the bill would federally prevent the authority of states to tax the income of certain residents 

who work in the state fewer than 30 working days or up to 6 

weeks. As such, the legislation has the effect of prohibiting the 

source of state revenue, one of NGA’s principle objections to Federal action in this case. 

NGA therefore urges the Committee to carefully consider the potential negative effects and state revenues before moving the bill 

forward. As my colleague, Commissioner Magee, just said, the 

Multistate Tax Commission has a model bill which would allow 

preemption for up to 20 days. States have come together with a solution here. So we believe the states can continue to work. New 

York, in fact, is considering the preemption of up to 14 days, and 

New York being the state that has the largest single exposure here. 

Turning to the Digital Goods and Services Tax Fairness Act, as 

we all know, the digital economy is part of the most complex state 

tax laws facing the states and facing you, quite frankly. Balancing 

the desire to promote electronic commerce for the sovereignty of 

states to determine their own tax system, requires both state collaboration and Federal cooperation to ensure government, business, 

and consumers all benefit from the 21st century marketplace. 

NGA opposed earlier versions of this legislation and subsequently joined with proponents of the measure to negotiate a 

framework that was workable for states and provide a greater certainty for businesses and consumers. Despite NGA’s work on 

crafting or helping to craft H.R. 1643, NGA cannot endorse the bill 

primarily because the framework of taxation of digital goods, without establishing the states have sufficient nexus to collect taxes on 

digital transactions, is simply not acceptable. 
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Finally, the Business Activities Tax Simplification Act. Mr. 

Chairman, NGA has opposed virtually every version of the BATSA 

introduced over the past several Congresses. Each bill is represented none more than Federal intrusion into state matters that 

would allow companies to avoid and evade state business activity 

taxes, increase the tax burden on small businesses and individuals, 

alter establish constitutional standards for state taxation, and cost 

states billions of existing revenue. 

U.S. courts have long recognized the authority of a state to structure its own business tax system as a core element of state sovereignty. BATSA would interfere with this basic principle by altering the Constitutional standard that governed the states may tax 

companies conducting businesses within their borders. 

Mr. Chairman, we believe BATSA is structured for the economy 

of the last century and not this century. 

All the bills before the Committee today, we believe have a common goal: Balancing the sovereignty of states who set their own tax 

and revenue systems versus the benefits of uniformity for evergrowing digital and mobile economy. To really accomplish this goal, 

however, Congress must first work with states to establish a level 

playing field for all retailers both in-state and out-of-state. Specifically, NGA calls on Congress to authorize states to require remote 

vendors to collect state sales taxes. 

Mr. Chairman, before I describe how such authority might work, 

first let me tell what it is not. What we are advocating is not a tax 

increase but rather the collection of taxes already owed. Further 

and most importantly, it’s not a tax on business but the collection 

of taxes on consumers within a state. Some of my panel members 

and members have mentioned the ‘‘taxation without representation.’’ As a point-of-view of the economist, Mr. Chairman, I can tell 

you what we’re advocating is quite the opposite. 

We’re asking for a collection of taxes already owed by residents 

within the states. They actually have the ability to vote within the 

state from which their taxes would be imposed, as well establish 

the principle for economists that sales taxes are indeed consumption taxes. They fall on the folks who are buying the goods and 

services. So this is not a tax on businesses out-of-state but rather 

a collection of taxes already owed on residents within the state. 

Currently, disparity exists on the taxation of goods and services 

subject to state and local taxes as you know. If a consumer buys 

at a local store, the approximate sales tax is collected from the consumer by the merchant and remitted to the taxing authority. If this 

same, identical transaction occurs over the Internet, the taxes are 

not collected by the merchant and the consumer rarely pays the 

equivalent use tax to state and local government. The Internet retailer is effectively subsidized by the inequity in the current tax 

system. This problem is compounded by the explosive growth of the 

Internet as more retailers are harmed and sales tax bases further 

eroded. 

State and business communities have worked together for more 

than a decade to address this issue. In fact, have come up with 

something called the Streamline Sales and Use Tax Agreement 

with 44 states and the District of Columbia, local governments, and 

business community coming together. This is a destination-based 
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taxing regime and to-date over 1,700 local businesses, mostly small 

retailers, are voluntarily collecting sales taxes in these streamline 

states and have remitted more than $1 billion in sales tax revenues. Obviously, it can be done without the adverse consequences 

or trade by the opponents. It is working today for 1,700 retailers 

in a number of states. 

Last Congress, the Senate overwhelmingly passed the Marketplace Fairness Act legislation to federally authorize states to require the collection of state taxes in return for simplifications of 

their tax codes. The House delayed legislative action and failed to 

take up the bill. In our opinion, this was a missed opportunity. 

NGA calls on this Committee to work with states this Congress to 

take up and pass meaningful and workable legislation that will 

once and for all address this core issue. 

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Mr. MARINO. Thank you, sir. 

We will now move into the period of the Congress men and 

women asking questions and I will recognize myself for 5 minutes. 

Mr. Carpenter, I am going to ask you to put your Constitutional 

hat on here. Does Congress have the clear Constitutional authority 

to enact Digital Goods and Services legislation? Why or why not? 

Mr. CARPENTER. Mr. Chairman, I believe you do. I think it is a 

very reasonable exercise of the commerce clause. There is a fairly 

high standard for suggesting to states that they can’t tax, but it 

has been long upheld by the courts that it is a reasonable exercise 

of Congressional authority to tell them how they may tax. And that 

is what this bill does. It says we are going to have a national 

framework and some basic rules to address the sourcing issue, and 

we are going to have some rules around nondiscrimination. 

That is all the bill does. I think it is a completely reasonable exercise of the Committee’s authority. 

Mr. MARINO. Does anyone on the panel disagree with that interpretation that the legislators have Constitutional authority? 

This is a first. This is good. This is a first. 

Mr. CARPENTER. Are we done? [Laughter.] 

Mr. MARINO. Shortly, thank you. 

Mr. Leaman, you described what not only a business has to go 

through because of the way the law is now, and you describe also 

what an employee has to go through. I think you said one individual had 50 W-2s. Could you expand upon that a little bit? Explain to us and to the public what the corporation has to go 

through step-by-step and what the, more importantly, the individual has 50 W-2s has to go through even if he or she is preparing 

them himself or herself. 

Mr. LEAMAN. That is correct. 

From a corporate standpoint, it really does come down to a tracking mechanism. So, how do you take the ability to track 23,000 employees? I used to think that tracking physical assets in a plant 

was a difficult task until I started having to track employees covering the country. 

So, it is a mechanism. We have put in place procedures, and 

what complicates it is oftentimes the employee or the manager will 

just, on a spur of the moment, need to satisfy a customer needs or 

demand and say you need to go to state A today or tomorrow to 

accomplish that customer needs. So that is never reported back to 

payroll or the tax department in terms of being able to track that 

person. So once we are able to obtain that information by year-end, 

we then have to process the W-2s and oftentimes the employee 

themselves don’t even realize they are going to be subject to multiple state taxation because they are not finding out until January 

of the close of the calendar year. 

So once they receive that, they contact a tax advisor because they 

have no idea how to handle that. And oftentimes the tax advisors, 

because they are in a situation just as we are, they want to comply 

with their ethical standards and professional standards and do 

what is appropriate according to statute. So it is not easy as it 

might be suggested to say it won’t be enforced. 
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And so, consequently, you know, we are in bind because we know 

we need to comply with statutes and regulations. And Turbo Tax 

doesn’t handle 50 W-2s, by the way. 

Mr. MARINO. So, in essence, if an employee worked in each of the 

50 states of the United States, would he or she have to be cutting, 

if they owe taxes, checks to each of those 50 states? 

Mr. LEAMAN. That is correct. 

Mr. MARINO. Thank you. 

Mr. LEAMAN. Minus those that aren’t subject to the state income 

tax. 

Mr. MARINO. Yes. 

Mr. Norquist, obviously I support this legislation but I am going 

to play devil’s advocate here and use my state as an example in 

my minute and a half. My district goes all the way to the Eastern 

New York. Say there is a trucking company right on the other side 

of the New York border and they are going to deliver something to 

Ohio. And they drive through the State of Pennsylvania. They don’t 

fuel-up in Pennsylvania, they cross the line right into Ohio, and deliver their merchandise. Why should Pennsylvania not be able to 

tax that entity, that company, that person, for the use of the road? 

Mr. NORQUIST. Well, if Pennsylvania had reasonable gasoline 

taxes, he would fuel-up in Pennsylvania and that would solve the 

problem. A lot of what the advocates and defenders of incompetent 

governors and incompetent mayors have been doing is saying we 

can’t reform our government to cost less; we can’t have reasonable 

tax laws. So because our taxes are too high, we really object to the 

fact that other states and cities who are competently governed, 

they have lower taxes, and people prefer to work, save, invest, and 

purchase things there. 

It is a distraction when politicians lust after pennies in the cushions of the sofa instead of looking at how to reform government so 

it costs less in the first place and politicians have been chasing 

after, trying to nickel and dime the new economy whether it is taxing Uber or Airbnb or the Internet. And at some point, they should 

govern and figure out how to do things more effectively and have 

taxes that are competitive with competently-run entities. 

Mr. MARINO. Thank you. My time has expired. 

The Chair now recognizes the Ranking Member from Georgia, 

Mr. Johnson. 

Mr. JOHNSON. Thank you, Mr. Norquist. I am glad that we agree 

on marketplace fairness. It shows that people with different philosophies, in terms of the role of government in our society, do have 

common ground on a number of issues and marketplace fairness is 

one of them. I would be remiss if I were not to ask you about marketplace fairness. 

Mr. NORQUIST. The Marketplace Fairness Act? 

Mr. JOHNSON. Yes. 

Sales taxes are due on brick and mortar purchases. They are collected at the time of sale or the point-of-sale. Why is it that online 

purchases should be treated differently? 

Mr. NORQUIST. Well, online purchases can be taxed by the state 

where the business exists. Most states have chosen not to do that 

because then they would have to, if you are in Maine, you would 
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have to tax L.L. Bean’s sales, which you could do. Every sale in 

Maine, L.L. Bean could be taxed by Maine. They choose not to. 

So politicians don’t want to mug the guy in their state because 

they vote. 

Mr. JOHNSON. Well now, many states and local governments 

want to be able to collect use taxes from Internet sales. And they 

cannot do so—— 

Mr. NORQUIST. From citizens in their state or in their town? 

Mr. JOHNSON. That is correct. 

They want to be able to tax purchases. 

Mr. NORQUIST. They can legally do that to the citizens in their 

state. What they are not allowed to do is go across the state lines 

and tax somebody in another state. 

Mr. JOHNSON. Well, no. I mean marketplace fairness would just 

simply enable states and local governments to collect at the pointof-sale sales taxes on purchases made online. But you—— 

Mr. NORQUIST. From the business in another state. 

Mr. JOHNSON. Yes, correct. 

Mr. NORQUIST. Right. 

Mr. JOHNSON. You oppose that? 

Mr. NORQUIST. Yes. 

Look, states, local governments, have the power to tax their own 

citizens and they can abuse them as much as they can get away 

with and still get elected in the next election. But you can’t 

have—— 

Mr. JOHNSON. Why do you oppose a state’s desire to be able to 

collect those taxes though? 

Mr. NORQUIST. Because they are exporting their state power into 

another state and it leads to tremendous opportunities for auditing 

harassment. 

Hi, here’s a memo from the State of Alabama to the business in 

New York. We think you owe us $100,000 in sales tax. Here’s another letter, which is a financial contribution request from the Attorney General of the state. If you fill this form out, you can disregard the other one. 

Mr. JOHNSON. Well, I hate to interrupt you but I really would 

like to have further dialogue with you on this particular issue, as 

well as a range of issues. And I am going to make an effort to reach 

out to you so that we can sit down and talk offline. 

Mr. NORQUIST. Sure. 

Mr. JOHNSON. Because I realize how important you are to what 

is going on in America today. And I would love to have the opportunity to sit down and talk to you. 

Mr. NORQUIST. I would be delighted. 

Mr. JOHNSON. Thank you. 

Acuity Brands is a leading lighting manufacturer based in Georgia with facilities across the country. Acuity employees, over 1,000 

associates in my home state of Georgia and over 3,200 associates 

nationwide, who travel extensively across the country for training, 

conferences, and other businesses. In a letter in support of H.R. 

2315 that I will insert into the record, Richard Reese, Acuities Executive Vice President, writes that current state laws are numerous 

varied and often changing requiring that the company expend significant resources merely interpreting and satisfying states require-
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ments. Reese concludes that unified clear rules and definitions for 

nonresidents reporting and withholding obligations would undoubtedly improve compliance rates and it would strike the correct balance between state sovereignty and ensuring that America’s modern mobile workforce is not unduly encumbered. 

Mr. Lindholm, what is your response to that statement? 

Mr. LINDHOLM. Thank you, Mr. Johnson. 

I think he hits the message spot-on. You know, the key word 

there is balance. The mobility of our workforce is one of our economy’s greatest assets. This bill is not an effort to regulate our state 

tax system or to nationalize our state tax system. It is a recognition that we have 50 different rules and we could very easily have 

one rule. 

We are a Nation of 50 states but only one economy. Companies 

that are operating within that economy have to compete globally 

with companies operating in the Pacific Rim, in the E.U., and 

South America that don’t have to deal with the cumbersome nature 

of a subnational tax system such as ours. This is just a, you know, 

the problem is not that a specific state has the wrong statute. The 

problem is in the disparity of the rules. 

Mr. JOHNSON. Thank you. 

And with that, Mr. Chairman, I would ask unanimous consent to 

insert the following materials into the record. One is a letter from 

Acuity Brand’s lighting, one of the leading manufacturers of lighting and controls equipment in the world, in support of H.R. 2315. 

And also, a letter from the Council on State Taxation, the premiere 

state tax organization representing taxpayers, in support of H.R. 

2315. 

And with that I yield back. 

Mr. MARINO. Without objection. 

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Mr. MARINO. The Chair now recognizes the Chairman of the full 

Judiciary Committee, Congressman Goodlatte. 

Mr. GOODLATTE. Thank you, Mr. Chairman. 

I want to thank all of our witnesses for their testimony and I will 

start with Mr. Norquist. 

You support the Business Activity Tax Simplification Act, 

BATSA, which would codify physical presence as the standard for 

business activity taxes. What do you say about the Marketplace 

Fairness Act, the Senate bill on sales taxes, remote sales taxes, and 

similar proposals that would move in the opposite direction and repeal the physical presence standard as it currently applies to sales 

taxes? 

Mr. NORQUIST. Yes. 

The target of politicians who want to be able to raise taxes on 

people who can’t vote against them was never really online sales 

or sales taxes. I served on the commission that you guys set up to 

think through back in the 90’s how do we tax the Internet or Internet sales. And one discussion was, well, what if we taxed Internet 

sales but we passed BATSA and the advocates of higher taxes said, 

‘‘Oh, no. Are you kidding? There is no money to be had taxing sales 

tax as we want. We want to be able to tax business activity across 

state lines.’’ 

So while they are nice to have this small amount of money that 

they can garner from people in other states and businesses in other 

states from online sales, so-called ‘‘Marketplace Fairness Act,’’ 

which we strongly oppose, they also don’t want BATSA because 

they want to reach across state lines on corporate and income taxes 

as well. 

Mr. GOODLATTE. Thank you. And you have pretty much answered with that answer my second question. So I will go down the 

line starting with Mr. Rosen. 

It strikes me that all of these bills are addressing areas where 

states waste a lot of resources and businesses waste a lot of resources complying with regulatory tax procedures that cost a lot of 

money and don’t yield, often, a lot of revenue. And I am wondering 

if you would just comment on that observation? 

Mr. ROSEN. Yes, that is absolutely true. 

There is a study conducted by a University in Michigan that 

found that complying with income taxes, state income taxes, was 

much more burdensome than even sales taxes. And in preparation 

for today, I was thinking of bringing a 600-page printout of just 

how to source certain services among the various states. I decided 

that would be too dramatic so I didn’t bring it. But the complexities 

involved in dealing on an interstate basis are just huge. 

And that is in addition to the principle that, if I am not getting 

the benefits protections from the government, why should I have 

to learn all the laws and rules that the government promulgates? 

Mr. GOODLATTE. Do you think the states, themselves, would be 

better served by having clear, bright lined tests in all these areas? 

They can tax their own constituents and those who clearly have 

sufficient physical nexus in a state or locality to impose that tax, 

but then, also, encourage their own businesses in their area to not 

worry about all of these tax complications and go out and expand 

their businesses. That really seems to me what the whole purpose 
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of interstate commerce is and why we wrote a new Constitution to 

promote, in 1787, to promote interstate commerce and have the 

Federal Government regulate it to the extent it needs to be regulated and not have, at that time 13, and today 50 different states 

imposing complicated different regulations? 

Mr. ROSEN. I think you are absolutely right. I think the inefficiency is generated by this murky area of nexus. When does a company have enough connection with a jurisdiction before that jurisdiction can assert its jurisdiction over that business has been a debate for many, many decades. 

Mr. GOODLATTE. Okay. I am running out of time so I am going 

to give Mr. Lindholm an opportunity to weigh-in on this. 

Mr. LINDHOLM. You know, on the BATSA bill specifically, you 

know, we have the world’s strongest economy and we still don’t 

know, companies still don’t know when they have a filing obligation 

when they enter into a state. That is unconscionable. That should 

be fixed. 

Mr. GOODLATTE. Mr. Leaman? 

Mr. LEAMAN. With respect to H.R. 2315, we have a real example 

within the State of Michigan where we pattern the audit process 

after the IRS Federal Cap program; where they are auditing us in 

real-time. And they have taken 40 percent of their time out of the 

audit process. 

And so, to address your question about the efficiencies of government, government is looking for the opportunities to reduce the administrative burdens internally. And I think these laws go a long 

way to reduce that burden. 

Mr. GOODLATTE. Mr. Carpenter? 

Mr. CARPENTER. With respect to the Digital Goods bill, I think 

clarity and simplicity absolutely would benefit not only consumers 

and the businesses that are trying to serve as agents of the states, 

but clarity in the form of this legislation would benefit the states. 

I think it is a very open question today whether they have clear 

authority to tax in the digital goods space. I think it is very analogous to when this Committee acted 15 years ago to bring some clarity to how mobile voice was dealt with. And I think for that reason 

the legislation would benefit all sides of the equation; consumers’ 

businesses and states alike. 

Mr. GOODLATTE. My time has expired but if you allow the people 

with a somewhat contrary point-of-view to weigh-in—— 

Mr. MAGEE. Without objection, of course. 

Mr. GOODLATTE. I would like to hear Ms. Magee. 

Why wouldn’t having clear bright line tests save the states a lot 

of resources that they devote to trying to collect what are sometimes small amounts of taxes and the growth of your in-state businesses in their ease with which they can do more business outside 

of the state, and you will derive more revenue from that, replace 

whatever your concerns are for losing revenue now? 

Ms. MAGEE. Well, with regards to income tax, the State of Alabama almost, as totally coupled with IRS regulations. So there is 

a lot of consistency already on the books and that is pretty common 

nationwide. 
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So most states do adhere and couple to the IRS regs. So if a corporation is following IRS rules regarding its certain taxing issue 

than they are also following the states. 

Mr. GOODLATTE. Good. So that consistency helps you. 

Ms. MAGEE. The state percentage is very, very small, bear in 

mind, compared to the Federal income tax amount. Our effective 

rate in Alabama for corporations is about 3 percent. 

Mr. GOODLATTE. Got it. 

Mr. Crippen? 

Mr. CRIPPEN. I would say clarity is always good, but as an economist I would say those lines need to be drawn to meet the economic 

reality. These days, physical presence is much less important as a 

means or end of business than it ever was. Manufacturing is not 

in states, it’s off-shore. Electronic commerce can exist anywhere. 

Incentives to move income around are paramount. So, yes, lines are 

nice, but they have to be drawn in a sense to reflect economic reality. 

Mr. GOODLATTE. But duplicative taxation and regulation that a 

business might face in a multitude of states that it is attempting 

to do business in can have a detrimental effect, can it not, on the 

economic growth of that business and job creation? 

Mr. CRIPPEN. It could have but it depends on, again, where we 

have talked about some solutions here today on mobile workforce, 

for example. States are working on exemptions not unlike the bill 

would entail, but it is not, I think, I think it is a false promise to 

say that a number of day’s exemption relieves a lot of burden. You 

are still going to have to track those employees. 

And so, the question is what relief do you want to give these 

larger businesses as opposed to what revenue impacts do you want 

to have on states and—— 

Mr. GOODLATTE. Well, on many of these issues we are talking 

about smaller businesses too, are we not? I mean particularly with 

regard to Internet sales tax issues. A business going into a state 

to attend a meeting or attend a conference or an exposition of some 

kind and then being subject to filing tax on that would seem to 

yield very little to the state relative to what it is effort has got to 

be to try to collect that. 

Thank you, Mr. Chairman. 

Mr. MARINO. The Chair recognizes the Ranking Member of the 

full Judiciary Committee, Congressman Conyers. 

Mr. CONYERS. Thank you very much. 

Back to Director Crippen, you have indicated that Congress 

should address the remote sales tax issue before any other Federal 

legislation regarding state tax issue is passed. And I think you are 

pretty firm on that and I would like you to elaborate if you think 

you need to anymore. 

Mr. CRIPPEN. Sure. 

Well, I think the one point we may not have made as much as 

we ought to is that it is a very large and growing problem as Internet sales increase. We are now approaching $300 billion a year. Estimates are that within a few years that will double. And so, it 

means that the inefficiencies in our tax system and the imposition 

on small businesses and governments will double as well. It is a 

very large problem and growing rapidly. 
103 

Mr. CONYERS. Now you have had something to say, I think, 

about Mr. Norquist’s suggestion that we pass a permanent Internet 

tax moratorium. As you know, we have historically extended the 

moratorium on a temporary basis. Are there circumstances in 

which we could pass a permanent moratorium that would meet 

your approval? 

Mr. CRIPPEN. I don’t think so, Mr. Chairman. Certainly, none 

that we have seen. It is obviously in a position on state taxing authority and there are a number of states, as you know, who already 

have this, have exercised this power, and are grandfathered in 

these extensions. 

Mr. CONYERS. Ms. Magee, there are several legislative proposals 

introduced or are floating around to address the remote sales tax 

issue. There is the Marketplace Fairness Act in the Senate, Chairman Goodlatte’s discussion draft focusing on hybrid origin sourcing 

approach, Mr. Chaffetz’s discussion draft of a rewrite of marketplace fairness. Are any of these proposals meet the perspective that 

you have on this subject? 

Ms. MAGEE. I have not seen Chaffetz bill yet. So I am told it 

looks pretty similar to Marketplace Fairness Act and we strongly 

support Marketplace Fairness Act. 

We have had consumer’s use tax on the books in Alabama since 

1936. The tax is owed. It is a field on the individual income tax 

return for every taxpayer in our state to complete, to fill out, how 

many dollars they spent on remote sales in order to calculate the 

tax. It is a mandate that has been on the books since 1936. 

What we are asking now is that you pass a law that requires the 

retailers to collect and remit the tax to the states in a simple way. 

They are already doing it now. We have hundreds of thousands of 

accounts in Alabama that are already remitting use accounts. And 

what we have, of course stores that have nexus, but we also have 

voluntary remittance because some of the retailers don’t want to 

program their shopping cart twice. They want to program it once. 

So we are already receiving, from voluntary remitters, this use 

tax that is legally owed. We are just asking the retailer environment be directed by Congress to remit it to the states in a simple 

way. 

Mr. CONYERS. What about the hybrid origin sourcing approach, 

does that meet your high standards? 

Ms. MAGEE. No, sir, it does not. [Laughter.] 

Mr. CONYERS. Okay. 

Mr. Lindholm, what is your view on some of these different approaches? 

Mr. LINDHOLM. On the sales tax collection issue? 

Mr. CONYERS. Yes. 

Mr. LINDHOLM. The Supreme Court has indicated that the reason 

that they are low to allow collection is because of the burdens imposed by our 50 state system. We have been very supportive of the 

streamline sales tax project in an effort to get standardization in 

the area, standard definitions, adequate notice to make things simpler for businesses trying to comply with 50 states and thousands 

of localities, different rules. 
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We, therefore, are supportive of efforts to allow a collection responsibility as long as significant steps are taken to make it a simpler system for businesses to operate within. 

Mr. CONYERS. Thank you so much. 

Mr. Chairman, I would like unanimous consent to enter these 

three documents into the record: The National Council of State 

Legislatures letter; a joint letter from local government organizations; and a joint letter from several labor groups including 

AFSCME, AFL-CIO, AFT, NEA—has he done it already? 

Okay. And UAW. 

Mr. MARINO. Without objection, so ordered. 

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Mr. CONYERS. Thank you, sir. 

Mr. MARINO. Yes. 

The Chair now recognizes the gentleman from California, Congressman Issa. 

Mr. ISSA. Thank you, Mr. Chairman. 

Every once in a while, we get an opportunity here to quote something and, in this case, I guess I will paraphrase. It does seem like 

it is Groundhog Day again. And although, those who remember 

that movie realize that, you know, we keep coming back, we keep 

having the same discussion, the panel does change, some of you 

age, others do not. [Laughter.] 

Grover, you can take it any way you want on that one. [Laughter.] 

So, since we are here again, I am going to try and take a different tack than I did perhaps the last seven or eight times we had 

a similar hearing on fairness and Constitutionality, and so on. And 

ask my question briefly and really intended for the public to make 

sure that the American people get more comfortably with the approaches that Congress is taking. 

And Mr. Carpenter, I will probably use you as the Constitutional 

Strawman. That will make Chris Cox happy. 

But, Mr. Crippen, I think you did a good job of it too. 

Sales tax is owed by whom? 

Mr. CARPENTER. Sales tax on a digital good would be owed by the 

purchaser of the digital good. 

Mr. ISSA. But an analogue good? 

I buy a washing machine, it leaves Pennsylvania, it arrives in 

Ohio, I live in Ohio, it is delivered to my home; who is the tax authority that determines that and who is to pay it? 

Mr. CARPENTER. Ohio would be the tax authority. And the consumer, to the extent they—— 

Mr. ISSA. Right. 

So, going to the commissioner for just a second, any good arrives 

in Alabama pursuant to whatever the tax is, where it is delivered, 

where the person resides depending upon how you configure your 

law, that tax owed by the individual. We, the people, voting public, 

all the rights in privileges and obligations that come with taxation 

and representation. We are taxing ourselves at six and a half, 

seven and a half, 8 percent, whatever, on that washing machine delivered to our home in Alabama. Correct? 

Ms. MAGEE. That is correct, sir. That is the law. 

Mr. ISSA. Okay. 

So here today, we are really only dealing with whether or not we 

participate in assisting the states in the collection by their citizens 

of the tax. And, would you all agree, for everyone out there, that 

the taxes on the citizen or the person who buys it and that in fact 

that tax is lawful and determined by the states. Right? The states 

have a right to tax their residents and they do it. And I am not 

dealing with some of the other bills here today. I am just sort of 

dealing with digital or non-digital products delivered to someone. 

So the perplexing problem we have been dealing with for five or 

six Congresses is how do we in fact or do we assist the states in 

doing it recognizing that we have a long tradition that if you do 

not have nexus—Commissioner, if you do not have nexus over a 
115 

company, the mere shipping of goods or even the incidental participation of a salesman going in and out, does not create nexus. From 

your background, that is true right? 

Ms. MAGEE. Well, because of the Quill decision, yes, sir. 

Mr. ISSA. Right. 

And we want to keep that. We don’t want to have 50 states putting an auditor into a cubicle at every small business that happens 

to sell over state lines, do we? 

Mr. MAGEE. No, sir. 

And I think you will find great support for a uniform auditing 

methodology as marketplace fairness had in it. I think that the 

states—— 

Mr. ISSA. Okay. Well, before we get into the uniform auditing because you would agree—and Mr. Crippen, I guess I will go to you 

because I cited some of your good words earlier. We, in Congress, 

do not easily have the ability to say that a nonresident of a state 

shall in fact fall under any mandate of another state, do we? 

Mr. CRIPPEN. That is right. 

Mr. ISSA. We do, though, have the ability to support a state in 

collection of taxes by its own residents. Correct? 

Mr. CRIPPEN. Correct. 

Mr. ISSA. So I am just going to close with one question and it is 

not in any of these bills. Every state in the union today, as I understand it, would have the ability to mandate that UPS, not the post 

office, we would have to assist in that, UPS, FedEx, and any other 

common carrier collect taxes at the time of delivery or ensure that 

they are collected the same as customs does when something comes 

from outside the country into the U.S. That authority exists. Isn’t 

that true? 

So ultimately, it is a question if this economy, this digital economy, continues to grow, of whether states in order to defend, if you 

will, the destruction of their own brick and mortar businesses find 

it necessary to find ways to collect if we don’t act. Would that be 

correct? Would you all agree that some acting will in fact prevent 

arbitrary actions by the states? 

Mr. Carpenter? 

Mr. CARPENTER. We certainly think clarity in this space would 

be helpful and should come from Congress. 

Mr. ISSA. And Mr. Chairman, if we could just let Mr. Norquist 

chime in and I—— 

Mr. NORQUIST. I think that Congress certainly could make things 

a lot worse. They have a track record that suggests this happens 

from time to time and the Marketplace Fairness Act would empower states against citizens and businesses in other states. So 

that would be moving in the wrong direction, but a number of 

these bills all move in the right direction in simplifying what is 

going on and making sure that states only tax citizens that actually live and work in their states. 

Mr. ISSA. Thank you, Mr. Chairman. 

Mr. NORQUIST. And vote. 

Mr. MARINO. The Chair now recognizes the Congressman from 

the State of Washington, Ms. DelBene. 

Ms. DELBENE. Thank you, Mr. Chair. And thanks to all of you 

for being with us today. I am very happy that we, as a Committee, 
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are taking up state tax issues. In many areas of the law, the digital 

age has created new complexities and definitely at times illogical 

results where the law hasn’t kept up with the pace of technology 

or the ways we purchase or live and do business. However, as 

someone who has a career in business, in technology, and a former 

revenue director for the State of Washington, I can tell you that 

from both perspectives some of the bills we are discussing today 

seem to be misguided. 

The physical presence standard in BATSA, for example, would 

favor large businesses that have a limited physical presence, but a 

huge volume of economic activity within an individual state. Meanwhile, shifting the state corporate tax burden to main street small 

businesses along with manufacturing, national resources, and service industries, businesses that create local jobs and pay local property taxes. It is easy to envision an environment under BATSA 

where the big guys are planning around and avoiding local taxes 

all the while reaping the benefits of doing businesses in states 

across the country. 

Meanwhile, small businesses that are paying for the benefits for 

doing business in any given state are put at a competitive disadvantage. And this critical point goes to marketplace fairness, 

which we have been talking about or the online sales tax issue, 

which really boils down to ensuring brick and mortar stores that 

make up the fiber of our communities aren’t penalized or put on 

an unequal playing field without a state online retailers. 

I know we’ve talked about this a bit and, Commissioner Magee, 

I wondered if you could tell us the economic impacts this not passing legislation like marketplace fairness has on your state? And I 

also would like you to highlight what that means to local jurisdictions because we talked about state revenues but this is primary 

revenue source for local jurisdictions that I think is important we 

highlight the impact there. 

Ms. MAGEE. Oh, absolutely. Thank you. 

You know, I have never been a big fan of passing a tax because 

the state needs the revenue. I am more of a fairness person. And 

I think the issue here is an unequal playing field for the brick and 

mortar versus the Internet retailer, or the online remote seller. So 

I would not want to say, Alabama, it needs this law because we 

need a $100 million for the general fund. That is true and it would 

probably bring anywhere from $100 and $175 million per year into 

our state, city, and county coffers. But that is not my point here 

today. 

My point for all state administrators is that we don’t like to pass 

taxes or incur new regulations just to plug a funding gap. We think 

it is a fairness issue. We want to treat all business owners with 

an equal manner. And right now, there is not an equality issue 

when it comes to having a brick and mortar store in Alabama or 

any other state that has a sales tax. 

Ms. DELBENE. Now, to be clear, this is not a new tax. This would 

not be passing new taxes. You indicated earlier, these are use taxes 

that are already owed. 

Ms. MAGEE. Since 1936. 

Ms. DELBENE. You know, I went to a renting store in my district, 

good example, brick and mortar in a local community. People come 
117 

in, try on running shoes, find the exact pair they need and many 

times might leave that store and buy it online just because of the 

difference between the amount they would pay with sales tax 

versus without sales tax. They are still a resident of a state. They 

are still buying it, but that shows you that we have an unequal 

playing field where there is a disadvantage from our local retailers. 

I assume you have scenarios like that that you hear about all the 

time. 

Ms. MAGEE. We definitely do. It is called showrooming. 

And so, it is incredibly unfair because they are paying, the local 

business paying property tax, they are paying payroll tax, they are 

employing our citizens. And yet, the profit margin is being increased for the online retailer than the brick and mortar retailer. 

So it is definitely a huge problem. 

We are seeing a great erosion of our sales tax base and it is only 

because of the way the product is distributed. The product is exactly that same pair of tennis shoes. But the way it is distributed 

means the state, cities, and counties lose out on that sales tax we 

would have otherwise received. Except for the consumer who technically owes a tax and we will still ask them for that tax, but can 

you imagine tracking down that kind of volume in order to get the 

same tax revenue had the retailer just collected it at point-of-sale. 

Ms. DELBENE. And in a state like mine, Washington State, 

where we do not have a state income tax, collection is even more 

complicated because there is not that place on the form to fill out. 

It would be a totally separate process, which makes it even more 

challenging and highlights how important legislation like marketplace fairness would be. 

Thank you very much. I am running out of time. 

And I yield back, Mr. Chair. 

Mr. MARINO. Thank you. 

The Chair now recognizes the Congressman from Michigan, Mr. 

Bishop. 

Mr. BISHOP. Thank you, Mr. Chair. 

Thank you to the panel. I greatly appreciate your time and testimony today. 

I am very interested in this area of public policy, having come 

from small business myself, having seen the stifling effects of regulation on small business in particular. This particular bill, H.R. 

2315, the Mobile Workforce bill, addresses the concern that I think 

is consistent with what we are seeing today with the global workforce and in a way in which we deploy our employees across this 

country. In many cases, we do it without a real understanding of 

just how well-traveled our employees are and we have to do whatever we can to ensure that we follow and track our employees, 

which is an added burden. 

I am very interested to hear, and I guess I would like to direct 

this to Mr. Leaman, we have heard today a discussion that suggests that business is almost the enemy of government. We have 

heard words like ‘‘evade’’ and ‘‘avoid’’ tax liability. To me, as a business owner, I am aghast at such a thought, that somehow I have 

to defend myself from this suggestion that I am liable in some way, 

shape, or form and my business is in a position to have to respond 

to that. 
118 

A business like Masco, to what extent do you dedicate resources 

to address these issues when a taxing entity comes in on an audit 

or some kind of inquiry? What resources do you put forward to 

have to deal with that to ensure that you can avoid and evade compliant with whatever law there is? Is there uniformity to the way 

in which they approach this process? I know you have the CAP program in your company, can you explain to us the resources dedicated to what you do? 

Mr. LEAMAN. Yes, Congressman. Likewise, I take it personally 

when you hear comments about business because historically 

Masco has always put forth the effort to cooperate with the taxing 

authorities and comply with the tax laws. To give a perspective at 

the Federal level with the IRS Cap audit out of a department of, 

let’s say, 25 people, we probably have about six or seven people 

that work with the IRS, literally, on a regular, daily basis. They 

reside in our department. 

With the Michigan Cap program, we have been able to simplify 

that process where they are able to come in and, over a 3-month 

period, start and complete the audit with about two or three of our 

resources advocated. But, again, streamlining and simplifying the 

compliance and the audit process by the cooperation with these 

programs. Albeit, other states don’t have similar programs, we 

make similar efforts to assist them in completing their task and 

their job because we know and we recognize they have a job to do 

to collect and to assess proper revenues by each company. 

So, you know, our efforts are primarily focused in terms of how 

we run our tax department around how we cooperate with taxing 

authorities. 

Mr. BISHOP. So who defends the employee in situations like this? 

Mr. LEAMAN. And that is problematic. Because, again, as the 

chief tax officer of the company and my staff, we are unable to provide any kind of tax guidance or service and they are left on their 

own. And as I alluded to in my comments, you know we can’t even 

assist their tax advisors who contact us looking for assistance and 

guidance as well, too. And I think, really, when you boil this matter down, you know, I think all parties are properly assisted with 

H.R. 2315. I think the employees will be the ones who will be the 

single biggest beneficiaries from this enactment. 

Mr. BISHOP. Thank you, sir. 

Quick question for Mr. Rosen. A constituent asked me the other 

day about the CAT tax in Ohio. Their company has no presence, 

no physical presence in Ohio, yet their components, Ohio’s commercial activity tax taxes their component down the line in its end 

sales position. Can you tell me about this and tell me whether or 

not BATSA trust is the issue? 

Mr. ROSEN. Yes. 

Ohio was the first state to statutorily enact economic nexus with 

a quantitative threshold. And so, the people—the businesses in 

Ohio, and the residents of Ohio—loved it when it first happened; 

they said, ‘‘This is great. We are going to get the revenue from outside our state. We don’t have to pay anything. This is wonderful.’’ 

But then, we found businesses over time, when no other state 

were following Ohio’s lead, now those in-state businesses have to 

pay tax to other states. So they didn’t get very far. And so, the 
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CAT, the Commercial Activity Tax, in Ohio would be covered by 

BATSA. The 1959 law, 86-272, refers just to net income taxes. But 

a number of states have done inappropriate tax planning by looking at the Federal law saying, ‘‘Ah, if we change from a net income 

tax to another tax, we don’t have to obey this Federal law. We have 

that in legislative history in several states.’’ 

And, Ohio is one of those. Yes. 

Mr. BISHOP. Thank you, sir. 

Now, Mr. Chair, may I ask for unanimous consent that a document that I am holding be entered into the record entitled Employer-Employee Experiences with Nonresident Withholding? It is 

a testimonial of several different employers and employees. It is 

compiled by members of the Mobile Workforce Coalition, the American Payroll Association, and the Council of State Taxation. 

Mr. MARINO. Without objection, so ordered. 

[The information referred to follows:] 
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Mr. MARINO. The Chair now recognizes the Congressman from 

New York, Mr. Jeffries. 

Mr. JEFFRIES. Thank you, Mr. Chair. 

And I also want to thank the panelists for your presence here 

today and for the information that you have communicated. 

If I could just start with Mr. Norquist, and I thank you for you 

presence and for the work that you have done in the area of tax 

equity. We may not always agree on your particular positions but 

your contribution to the public square has been notable and significant. So I thank you for that. 

I wanted to ask about this concept that I think exists among 

some in the tax equity space, which is that there is this notion that 

there are donors and there are takers in the tax context. Is that 

a framework that some people use in the tax equity space? 

Mr. NORQUIST. Well, do you mean cities and states raise taxes 

and take money from people who earned it? 

Mr. JEFFRIES. Talking about individuals, for instance. As I understand it, there is the view among some, and I don’t know if you 

subscribe to this position, but there is a view amongst some that 

you have got donors in the tax system and then you have got takers. And the donors, as I understand it, are individuals who give 

more to the Federal Government in income tax than they get back 

in return in terms of Federal benefits. Is that a framework 

that—— 

Mr. NORQUIST. You are looking at states and cities or individuals? 

Mr. JEFFRIES. Individuals. 

Mr. NORQUIST. I guess you could look at it that way, but everybody and the Army would be a taker then. 

Mr. JEFFRIES. Okay. 

I am just wondering because there are some—— 

Mr. NORQUIST. I am not sure it is a useful concept but, yes. 

Mr. JEFFRIES. I am not sure I agree with the concept either but 

there certainly have been some conservative thinkers within this 

institution in my other service on the Budget Committee who have 

put forth this context that there are donors and there takers and 

the donors give more to the Federal Government in income tax, pay 

this high burden, 39.6 percent, and don’t get reciprocal benefits in 

return in terms of whatever the case may be; Social Security, Medicare, Federal benefits. 

Mr. NORQUIST. We are going to have to come up with a different 

word than donor because, as I understand it, tax collection is not 

a voluntary activity. 

Mr. JEFFRIES. Okay. I think we can agree with that. 

Now, in terms of the Mobile Workforce State Income Tax Simplification Act of 2015, I think I got that right. Seems like we need 

a simpler title. But the Mobile Workforce State Income Tax Act, it 

would cost New York State, I represent a district within New York 

State, approximately $110 to $130 million per year which is more 

than all other states combined; as I understand it. And I am trying 

to figure out the rationale for putting this forward. 

From an equity standpoint as it relates to—what federalism allows is the individual states to have an opportunity to tax activity 
126 

that occurs within its jurisdiction. So, if you could help me out, Mr. 

Norquist or Mr. Lindholm, with the rationale, I would be grateful. 

Mr. NORQUIST. Well, I think you want the workforce to be as mobile as possible. You want it to be, for people to travel across state 

lines and across city lines, as easily as possible. You want to reduce 

the total regulatory paperwork on how people handle this stuff. 

And there are very real abuses where, you know, the government 

says we think you thought of something in California and you 

moved to Nevada and you invented it there, and they chase after 

people for years and years to tax—they were doing their thinking 

in California. 

I think that it is very dangerous if governments can, again, reach 

out into people who largely live in other states and easily raise 

taxes on them because there isn’t the capacity to vote against those 

elected officials. A lot of people in New York who do some of their 

work outside of the state, I think bright lines that make it easier 

for people to travel and work and not feel they are going to end 

up getting, you know, gone after by the government is probably a 

good idea. 

Mr. JEFFRIES. Well, thank you and I understand your electoral 

accountability point. 

In the time I have remaining, Mr. Chair, I would just ask unanimous consent to introduce a document prepared by the Tax Foundation Special Report, Number 158, ‘‘Federal Tax Burdens and 

Spending by State.’’ 

Mr. MARINO. Without objection, so ordered. 

[The information referred to follows:] 
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Mr. JEFFRIES. And what this document demonstrates is that a 

state like New York, for instance, in the data that was used with 

this particular study regularly, or at least in this particular tax 

year, sent an access of $23 billion more to the Federal Government 

than we get back in return. And I don’t necessarily subscribe this 

donor and taker philosophy that some have articulated, but I think, 

if we are going to apply this framework where we are concerned 

about tax equity and fairness, that the fact that New York State 

regularly sends tens of billions of dollars more to the Federal Government to be spread across the entire Nation, including states like 

Georgia which received billions of dollars more from the Federal 

Government than they send, then, you know, we have got to think 

carefully about how we are going to deal with impacting a state 

like New York; where we know people come in and use the infrastructure, use the police services, use the fire services, use the 

sanitation services, use the court system in order to make money. 

I know my time has expired, but thank you for your answers and 

I yield back. 

Mr. MARINO. Thank you. 

The Chair now recognizes the Congressman from Texas, Mr. 

Ratcliffe. 

Mr. RATCLIFFE. Thank you, Mr. Chairman. Thanks for holding 

this hearing today. I appreciate all the witnesses being here. I 

think it has been a very good hearing and discussion about many 

of the inequities that our current tax system has that is frankly resulting in taxation without representation. 

Mr. Lindholm, I would like to start with you. In your written testimony, you discussed the disproportionate costs of the current system on folks who live in states with no personal income tax like 

the 700,000 Texans that I represent. And I agree with you. 

Many of my constituents are severely impacted under the current 

structure. They have to deal with enormous compliance costs and 

can’t file for refunds or credits in other states. But, some of my colleagues here are still arguing that the Mobile Workforce Act isn’t 

necessary because states offer these offsetting credits for income 

taxes paid in other jurisdictions. 

So my question is: Can you talk about whether or not these offsetting credits do anything to solve the problem of a filing burden 

for employees and employers? 

Mr. LINDHOLM. Thank you, Mr. Ratcliffe. It does not. 

And let me clarify, or go back to your initial comment about 

states that have no personal income tax because those states have 

chosen to fund their essential resources without a personal income 

tax. So, when those states send their, or employers in those states 

send employees across state lines, they should pay personal income 

taxes and taxes where they work and, as you say, do not have a 

personal income tax they pay in Texas for which to offset those. 

That is one of the reasons why there is a very slight revenue dislocation, is because of those. But, again, the person who is hurt 

there is the employee that lives in the state with no personal income tax who was paying higher property taxes or higher sales 

taxes because the state has no personal income tax. 

The filing burden is enormous. And the rate of noncompliance because of the filing burden is enormous. The AICPA is one of the 
130 

strongest supporters of this bill. They are put in a terrible position 

of having somebody come to them and say, ‘‘I have worked in ten 

states, do I have to file in those states?’’ 

And legally, the answer is, yes, you have to file in those states. And by the way, we are going to have to charge an extra $200 per 

state return. It really puts the CPAs in a very difficult box because 

of the complexity, because of the added cost. 

Mr. RATCLIFFE. Thank you, Mr. Lindholm. 

Mr. Leaman, like Mr. Lindholm, in your testimony you talk 

about this confusing patchwork of state income tax rules that your 

employees are forced to grapple with every year. And I appreciated 

your testimony. I want to make sure that I heard it clearly with 

respect to nonresident filings often involving minimal taxes. Did I 

hear that correctly? 

Mr. LEAMAN. Correct. 

Mr. RATCLIFFE. So is that another way of saying that in some circumstances you have mobile employees that have to hire a tax professional at hundreds of dollars per hour to pay for taxes that 

might be just a few dollars? 

Mr. LEAMAN. That is correct. 

And again, because of the corporate policy and philosophy, which 

is to put a system in place that doesn’t necessarily track de minimis amounts because it is a policy and/or procedure we have in 

place, both a corporation and the employee is put in that position 

of having to go ahead and file. 

Mr. RATCLIFFE. Okay. 

Well, I would hope that everyone here could agree that in addition to being unfair, that is just absurd. And also observed was the 

fact that you discussed with Chairman Marino, and I want to make 

sure that I heard that clearly. Are there mobile employees that are 

sometimes receiving 50 W-2s per year? 

Mr. LEAMAN. We have a couple extreme cases because of that, 

yes. That is correct. 

Mr. RATCLIFFE. Well, I know how difficult it is to deal with the 

IRS with one W-2. I can’t imagine having to deal with 50, but let 

me ask you this question. Are these the types of employees that are 

making hundreds of thousands of dollars so that they can easily 

absorb the compliance costs? 

Mr. LEAMAN. And again, our typical workforce that falls into this category are usually making $50,000 or less. 

Mr. RATCLIFFE. Okay. 

So would it be fair to say, then, in some cases this huge compliance burden is falling on some of the people that can afford it the 

least? 

Mr. LEAMAN. That is correct. 

Mr. RATCLIFFE. Mr. Leaman, H.R. 2315 uses the word ‘‘simplification’’ in its title. Does this proposed bill, does it actually simplify as advertised? In other words, would it bring uniformity? 

Mr. LEAMAN. I think it does, Congressman. I think, you know 

again, as my opening remarks, it is a rare opportunity to have a 

bipartisan legislation that really addresses all constituents in this 

are individuals in this process, and I think it goes a long way to 

simplifying. 

Mr. RATCLIFFE. Thank you. 
131 

I see my time has expired. I yield back. 

Mr. MARINO. Thank you. 

The Chair now recognizes the Congressman from Michigan, Mr. 

Trott. 

Mr. TROTT. Thank you, Mr. Chairman. 

I want to thank all the witnesses today for being here. 

And Commissioner Magee, a couple questions. So you opposed 

H.R. 2315, correct? 

Ms. MAGEE. We don’t oppose it, but we would prefer the model 

MTC comm that each state adopted. 

Mr. TROTT. The model would be, in your mind, a national solution, though. Correct? 

Ms. MAGEE. Yes, it would be. 

Mr. TROTT. What happens if a state doesn’t adopt the model? You 

are looking to Congress to adopt the model in lieu of state solutions. Correct? 

Ms. MAGEE. On this issue we believe is that the state should 

adopt it not Congress. 

Mr. TROTT. So states have been known to tweak the models. So 

what happens then in terms of the simplification? 

Ms. MAGEE. Well, I mean, there is no doubt in anyone’s mind 

that simplification is the best way to go. We don’t want to have to 

deal with so W-2s, for example, which is an extremely rare, rare 

case. But we do need to keep up with the income being our in our 

state and this is one way to do that. 

It is not a burning issue in the State Department of Revenue 

across the Nation. This is rarely ever anything that comes up. 

Mr. TROTT. But you would agree, though, if we are going to do 

a model that is going to be adopted by 50 states, we are not going 

to end up with a simplification. I mean isn’t that a fairly logical 

assumption given how states tend to enact legislation? 

Ms. MAGEE. Well, I can’t argue with you there, sir. 

States certainly tweak and model to the point you don’t recognize 

anymore. But we really do—our effort and our goal is not to over 

complicate things. We don’t choose to do that. 

Mr. TROTT. So you know you say 50 W-2s is extraordinary. I had 

businesses where we routinely had 20 or 30. So 50 may be extreme 

but I mean 20 or 30 is still a burden for folks, wouldn’t you agree? 

Ms. MAGEE. Well, it is. But we have, like Alabama has, a free 

online filing system for any employee to file a nonresident return, 

free of charge. It is a very simple process they can use. 

So the states have gone to measures to make it simpler. 

Mr. TROTT. Still, 50 different states. 

Next question, though. One of the concerns you have with H.R. 

2315 is the voluntary recordkeeping. I wonder if you could speak 

to that and I wonder if you could explain how the recordkeeping 

would differ under the model that you advocate? 

Ms. MAGEE. Well, historically the recordkeeping is done by the 

employer and the employer remits those records annually to each 

Department of Revenue and to the IRS. That is a very valuable 

source of information. Number one, we use it more often than not 

to prevent fraud. It is our key purpose over the next couple of years 

to use this information sooner and faster both from IRS level and 
132 

the state level to prevent refund fraud. So the getting the W-2s is 

very, very important for the income tax return. 

And then, secondly, I mean it is a burden on the employee if they 

have to do this themselves. In corporations have departments that 

specialize in handling this sort of processing. This act makes it voluntary to the employee to do this. And so, that is why the model 

is something we prefer because it doesn’t make it—the employer 

would still be the person, entity, in charge of that. 

Mr. TROTT. But because of that, the employer is still going to 

have some of the same problems they have today under the model. 

Is that a fair statement? 

Ms. MAGEE. Yes, sir. But their compliance has not been something they have created an issue over, in my opinion, over the 4 

years of being commissioner. I have not had employers complain to 

us about keeping up with W-2s. It is part of the IRS process, part 

of the state process. 

Mr. TROTT. We had several people here today complaining about 

it. I mean maybe they haven’t gotten your address in Alabama but 

we have people here today complaining about it. 

Ms. MAGEE. The electronic world has changed so much. It has 

really simplified things so much to be able to file these things electronically. 

Mr. TROTT. Yes and unfortunately the electronic world hasn’t 

eased the regulatory burden on businesses. But thank you for your 

comments. 

I yield back. 

Mr. MARINO. Thank you. Mr. Collins is next, but I understand 

he does not have any questions for Mr. Norquist. Mr. Norquist has 

another engagement that he has to attend. 

You are fine? 

Mr. NORQUIST. At some point I do. Does somebody want to - - 

Mr. MARINO. Okay. 

Now, we have one more questioner and I didn’t know if you had 

to get to where you are going instantly. 

Mr. NORQUIST. I do, but I will wait. 

Mr. MARINO. All right. Thank you, sir. 

Now, the gentleman from Georgia, Congressman Collins, is next. 

Mr. COLLINS. Thank you, Mr. Chairman. I appreciate that and 

Mr. Norquist, you know. As an old Baptist pastor, I am used to 

people getting up and walking out whenever they feel like it. So, 

you know, if you need to, God bless you. Have a great day. You 

know? 

I want echo what my friend from California just said a few minutes ago. How many times are we going keep doing this? You all 

look great. God bless you. It is good to see you again. We have had 

these discussions over and over. I am one and I appreciate the 

Chairman bringing this up because it is now time to mark up, 

move on, and get something to a new topic. Okay? 

But I think at the end of this thing I support the bills that are 

being discussed today. But I really do want to talk about, for just 

a moment, one, again I had this conversation at this hearing last 

Congress about the just, what I believe is just ludicrous 50 W-2s 

that we can’t simplify. This is that and we got into a long conversa-
133 

tion and I am not going down that hole again. I just want to say 

that. 

But I appreciate you being here but I do want to talk about one 

that is not on our list today, and hopefully it will be pretty soon. 

And that is H.R. 235, the Permanent Internet Tax Freedom Act. 

It is not before the Committee today and I can’t talk about states 

regulatory and tax authority without first mentioning that bill and 

encouraging the Subcommittee and the Committee as a whole to 

quick action on it. 

I am a strong supporter and a proud cosponsor of the Permanent 

Internet Tax Freedom Act introduced by Chairman Goodlatte. The 

Internet Tax Freedom Act has been extended multiple times and 

passed the House by voice vote only last Congress. Again, that is 

what we do a lot of times. Let us kick it down—it is almost like 

we got to find a can to kick. So let us just find this can and we 

will kick it again next year. 

It will expire on October first of this year. Simply put, we can’t 

let this happen. This would actually permanently prohibit Federal, 

state, and local governments from imposing taxes on Internet access. I don’t think anyone would argue about the enormous impact 

of the Internet and the access to information and the opportunity 

that it provides. We need to keep it affordable so that Americans 

of all backgrounds can access the Internet rather than adding to 

the already huge burden faced by taxpayers. 

It is critical that we make permanent the Internet Tax Freedom 

Act once and for all to protect consumers and maintain growth and 

grow access to the Internet to prevent multiple discriminatory taxation, to encourage innovation, and to promote job creation and 

economic growth. 

And before I yield back, I want to say something that was said, 

and I think Mr. Norquist, I think you said it. I think it has been 

actually possibly previously implied by several others. Until we get 

to a position in the Federal Government—I am from the state government level. I worked for 6 years in Georgia on the issues of 

taxes, the issues of spending. 

I am asked all the time by folks: Why can’t you just, you know, 

do a budget. And I think it goes back to the inherent problem that 

we have. Government does it sort of the backwards way of most 

businesses. Most businesses will look at a business plan and they 

say, ‘‘Okay, this is what it is going to cost me if I open this business. It is going to cost me X dollars to break even and then to 

make a profit.’’ 

Government starts the opposite way around. They say, ‘‘Let us 

tax and figure out how to spend it.’’ And until we get that problem 

right, states are going to be looking for money, local municipalities 

are going to be looking for money. We have had a lot of discussion 

about a bill that is not on the agenda today, marketplace fairness. 

But I think we have got to get back to—that is what the people 

of the ninth district expect, and if we need to have an adjustment 

and we need to talk about the whole aspect of budget, let us do so. 

But let us remember at the end of the day what is government’s 

purpose, why are we here, and then we can see how the funding 

fits the purpose instead of our growing purpose in finding a funded 

for it. 
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With that, Mr. Chairman, I yield back. 

Mr. MARINO. Thank you. 

Seeing all the Members on the dais, this concludes today’s hearing. I want to thank all the witnesses for attending. I want to 

thank the people in the gallery for attending. 

And, without objection, all Members will have 5 legislative days 

to submit additional written questions for the witnesses or additional material for the record. 

This hearing is adjourned. Thank you. 

[Whereupon, at 12:09 p.m., the Subcommittee was adjourned.] 
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