I 

113TH CONGRESS 

1ST SESSION H. R. 2992 

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

purposes. 

IN THE HOUSE OF REPRESENTATIVES 

AUGUST 2, 2013 

Mr. SENSENBRENNER (for himself, Mr. GOODLATTE, Mr. SCOTT of Virginia, 

Mr. BACHUS, Mr. CHABOT, Mr. DUNCAN of South Carolina, Mr. JORDAN, and Mr. HASTINGS of Florida) introduced the following bill; which 

was referred to the Committee on the Judiciary 

A BILL 

To regulate certain State taxation of interstate commerce, 

and for other purposes. 

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

3 SECTION 1. SHORT TITLE. 

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

5 Simplification Act of 2013’’. 

6 SEC. 2. MODERNIZATION OF PUBLIC LAW 86–272. 

7 (a) SOLICITATIONS WITH RESPECT TO SALES AND

8 TRANSACTIONS OF OTHER THAN TANGIBLE PERSONAL

9 PROPERTY.—Section 101 of the Act entitled ‘‘An Act reVerDate Mar 15 2010 23:36 Aug 09, 2013 Jkt 029200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H2992.IH H2992

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1 lating to the power of the States to impose net income 

2 taxes on income derived from interstate commerce, and 

3 authorizing studies by congressional committees of mat4 ters pertaining thereto’’, approved September 14, 1959 

5 (15 U.S.C. 381 et seq.), is amended— 

6 (1) in section (a), by striking ‘‘either, or both,’’ 

7 and inserting ‘‘any one or more’’; 

8 (2) in subsection (a)(1), by striking ‘‘by such 

9 person’’ and all that follows and inserting ‘‘(which 

10 are sent outside the State for approval or rejection) 

11 or customers by such person, or his representative, 

12 in such State for sales or transactions, which are— 

13 ‘‘(A) in the case of tangible personal prop14 erty, filled by shipment or delivery from a point 

15 outside the State; and 

16 ‘‘(B) in the case of all other forms of prop17 erty, services, and other transactions, fulfilled 

18 or distributed from a point outside the State;’’; 

19 (3) in subsection (a)(2), by striking the period 

20 at the end and inserting a semicolon; 

21 (4) in subsection (a), by adding at the end the 

22 following new paragraphs: 

23 ‘‘(3) the furnishing of information to customers 

24 or affiliates in such State, or the coverage of events 

25 or other gathering of information in such State by 


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1 such person, or his representative, which information 

2 is used or disseminated from a point outside the 

3 State; and 

4 ‘‘(4) those business activities directly related to 

5 such person’s potential or actual purchase of goods 

6 or services within the State if the final decision to 

7 purchase is made outside the State.’’; 

8 (5) by striking subsection (c) and inserting the 

9 following new subsection: 

10 ‘‘(c) For purposes of subsection (a) of this section, 

11 a person shall not be considered to have engaged in busi12 ness activities within a State during any taxable year 

13 merely— 

14 ‘‘(1) by reason of sales or transactions in such 

15 State, the solicitation of orders for sales or trans16 actions in such State, the furnishing of information 

17 to customers or affiliates in such State, or the cov18 erage of events or other gathering of information in 

19 such State, on behalf of such person by one or more 

20 independent contractors; 

21 ‘‘(2) by reason of the maintenance of an office 

22 in such State by one or more independent contrac23 tors whose activities on behalf of such person in 

24 such State are limited to making sales or fulfilling 

25 transactions, soliciting order for sales or transVerDate Mar 15 2010 23:36 Aug 09, 2013 Jkt 029200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H2992.IH H2992

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1 actions, the furnishing of information to customers 

2 or affiliates, and/or the coverage of events or other 

3 gathering of information; or 

4 ‘‘(3) by reason of the furnishing of information 

5 to an independent contractor by such person ancil6 lary to the solicitation of orders or transactions by 

7 the independent contractor on behalf of such per8 son.’’; and 

9 (6) in subsection (d)(1)— 

10 (A) by inserting ‘‘or fulfilling transactions’’ 

11 after ‘‘selling’’; and 

12 (B) by striking ‘‘the sale of, tangible per13 sonal property’’ and inserting ‘‘a sale or trans14 action, furnishing information, or covering 

15 events, or otherwise gathering information’’. 

16 (b) APPLICATION OF PROHIBITIONS TO OTHER BUSI17 NESS ACTIVITY TAXES.—Title I of the Act entitled ‘‘An 

18 Act relating to the power of the States to impose net in19 come taxes on income derived from interstate commerce, 

20 and authorizing studies by congressional committees of 

21 matters pertaining thereto’’, approved September 14, 

22 1959 (15 U.S.C. 381 et seq.), is amended by adding at 

23 the end the following: 

24 ‘‘SEC. 105. For taxable periods beginning on or after 

25 January 1, 2014, the prohibitions of section 101 that 


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1 apply with respect to net income taxes shall also apply 

2 with respect to each other business activity tax, as defined 

3 in section 5(a)(2) of the Business Activity Tax Simplifica4 tion Act of 2013. A State or political subdivision thereof 

5 may not assess or collect any tax which by reason of this 

6 section the State or political subdivision may not impose.’’. 

7 SEC. 3. MINIMUM JURISDICTIONAL STANDARD FOR STATE 

8 AND LOCAL NET INCOME TAXES AND OTHER 

9 BUSINESS ACTIVITY TAXES. 

10 (a) IN GENERAL.—No taxing authority of a State 

11 shall have power to impose, assess, or collect a net income 

12 tax or other business activity tax on any person relating 

13 to such person’s activities in interstate commerce unless 

14 such person has a physical presence in the State during 

15 the taxable period with respect to which the tax is im16 posed. 

17 (b) REQUIREMENTS FOR PHYSICAL PRESENCE.— 

18 (1) IN GENERAL.—For purposes of subsection 

19 (a), a person has a physical presence in a State only 

20 if such person’s business activities in the State in21 clude any of the following during such person’s tax22 able year: 

23 (A) Being an individual physically in the 

24 State, or assigning one or more employees to be 

25 in the State. 


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1 (B) Using the services of an agent (exclud2 ing an employee) to establish or maintain the 

3 market in the State, if such agent does not per4 form business services in the State for any 

5 other person during such taxable year. 

6 (C) The leasing or owning of tangible per7 sonal property or of real property in the State. 

8 (2) DE MINIMIS PHYSICAL PRESENCE.—For 

9 purposes of this section, the term ‘‘physical pres10 ence’’ shall not include— 

11 (A) presence in a State for less than 15 

12 days in a taxable year (or a greater number of 

13 days if provided by State law); or 

14 (B) presence in a State to conduct limited 

15 or transient business activity. 

16 (c) TAXABLE PERIODS NOT CONSISTING OF A

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

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

19 for establishing physical presence under this Act shall be 

20 adjusted pro rata accordingly. 

21 (d) MINIMUM JURISDICTIONAL STANDARD.—This 

22 section provides for minimum jurisdictional standards and 

23 shall not be construed to modify, affect, or supersede the 

24 authority of a State or any other provision of Federal law 


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1 allowing persons to conduct greater activities without the 

2 imposition of tax jurisdiction. 

3 (e) EXCEPTIONS.— 

4 (1) DOMESTIC BUSINESS ENTITIES AND INDI5 VIDUALS DOMICILED IN, OR RESIDENTS OF, THE

6 STATE.—Subsection (a) does not apply with respect 

7 to— 

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

9 that is incorporated or formed under the laws 

10 of the State (or domiciled in the State) in which 

11 the tax is imposed; or 

12 (B) an individual who is domiciled in, or a 

13 resident of, the State in which the tax is im14 posed. 

15 (2) TAXATION OF PARTNERS AND SIMILAR PER16 SONS.—This section shall not be construed to modify 

17 or affect any State business activity tax liability of 

18 an owner or beneficiary of an entity that is a part19 nership, a S corporation (as defined in section 1361 

20 of the Internal Revenue Code of 1986), a limited li21 ability company (classified as a partnership for Fed22 eral income tax purposes), a trust, an estate, or any 

23 other similar entity, if the entity has a physical pres24 ence in the State in which the tax is imposed. 


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1 (3) PRESERVATION OF AUTHORITY.—This sec2 tion shall not be construed to modify, affect, or su3 persede the authority of a State to enact a law and 

4 bring an enforcement action under such law or exist5 ing law against a person or persons or an entity or 

6 entities, including but not limited to related persons 

7 or entities, that is or are engaged in an illegal activ8 ity, a sham transaction, or an actual abuse in its or 

9 their business activities in order to ensure a proper 

10 reflection of its or their tax liabilities, nor shall it 

11 supersede the authority of a State to require com12 bined reporting. 

13 SEC. 4. GROUP RETURNS. 

14 If, in computing the net income tax or other business 

15 activity tax liability of a person for a taxable year, the 

16 net income or other economic results of affiliated persons 

17 is taken into account, the portion of such combined or con18 solidated net income or other economic results that may 

19 be subject to tax by the State shall be computed using 

20 the methodology that is generally applicable to businesses 

21 conducting similar business activities and, if that generally 

22 applicable methodology employs an apportionment for23 mula, the denominator or denominators of that formula 

24 shall include the aggregate factors of all persons whose 

25 net income or other economic results are included in such 


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1 combined or consolidated net income or other economic re2 sults and the numerator or numerators shall include the 

3 factors attributable to the state of only those persons that 

4 are themselves subject to taxation by the State pursuant 

5 to the provisions of this Act and subject to all other legal 

6 constraints on State taxation of interstate or foreign com7 merce. 

8 SEC. 5. DEFINITIONS AND EFFECTIVE DATE. 

9 (a) DEFINITIONS.—For purposes of this Act: 

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

11 tax’’ has the meaning given that term for the pur12 poses of the Act entitled ‘‘An Act relating to the 

13 power of the States to impose net income taxes on 

14 income derived from interstate commerce, and au15 thorizing studies by congressional committees of 

16 matters pertaining thereto’’, approved September 

17 14, 1959 (15 U.S.C. 381 et seq.). 

18 (2) OTHER BUSINESS ACTIVITY TAX.— 

19 (A) IN GENERAL.—The term ‘‘other busi20 ness activity tax’’ means any tax in the nature 

21 of a net income tax or tax measured by the 

22 amount of, or economic results of, business or 

23 related activity conducted in the State. 

24 (B) EXCLUSION.—The term ‘‘other busi25 ness activity tax’’ does not include a sales tax, 


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1 a use tax, or a similar transaction tax, imposed 

2 on the sale or acquisition of goods or services, 

3 whether or not denominated a tax imposed on 

4 the privilege of doing business. 

5 (3) PERSON.—The term ‘‘person’’ has the 

6 meaning given such term by section 1 of title 1 of 

7 the United States Code. Each corporation that is a 

8 member of a group of affiliated corporations, wheth9 er unitary or not, is itself a separate ‘‘person’’. 

10 (4) STATE.—The term ‘‘State’’ means any of 

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

12 territory or possession of the United States, or any 

13 political subdivision of any of the foregoing. 

14 (5) TANGIBLE PERSONAL PROPERTY.—For pur15 poses of section 3(b)(1)(C), the leasing or owning of 

16 tangible personal property does not include the leas17 ing or licensing of computer software. 

18 (b) EFFECTIVE DATE.—This Act shall apply with re19 spect to taxable periods beginning on or after January 1, 

20 2014. 

Æ 


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