I 

110TH CONGRESS 

2D SESSION H. R. 5267 

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

purposes. 

IN THE HOUSE OF REPRESENTATIVES 

FEBRUARY 7, 2008 

Mr. BOUCHER (for himself, Mr. GOODLATTE, Mr. DAVIS of Alabama, Mr. 

CHABOT, Ms. HERSETH SANDLIN, Mr. FEENEY, Ms. JACKSON-LEE of 

Texas, Mr. GALLEGLY, Mr. JOHNSON of Georgia, Mr. PENCE, Ms. ZOE

LOFGREN of California, Mr. SCOTT of Virginia, and Mr. WEXLER) 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 2008’’. 

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

7 (a) SOLICITATIONS WITH RESPECT TO SALES AND

8 TRANSACTIONS OF OTHER THAN TANGIBLE PERSONAL


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1 PROPERTY.—Section 101 of the Act entitled ‘‘An Act re2 lating to the power of the States to impose net income 

3 taxes on income derived from interstate commerce, and 

4 authorizing studies by congressional committees of mat5 ters pertaining thereto’’, approved September 14, 1959 

6 (15 U.S.C. 381 et seq.) is amended— 

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

8 and inserting ‘‘any one or more’’; 

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

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

11 are sent outside the State for approval or rejection) 

12 or customers by such person, or his representative, 

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

14 ‘‘(A) in the case of tangible personal prop15 erty, filled by shipment or delivery from a point 

16 outside the State; and 

17 ‘‘(B) in the case of all other forms of prop18 erty, services, and other transactions, fulfilled 

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

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

21 at the end and inserting a semicolon; 

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

23 following new paragraphs: 

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

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


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1 or other gathering of information in such State by 

2 such person, or his representative, which information 

3 is used or disseminated from a point outside the 

4 State; and 

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

6 such person’s potential or actual purchase of goods 

7 or services within the State if the final decision to 

8 purchase is made outside the State.’’; 

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

10 following new subsection: 

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

12 a person shall not be considered to have engaged in busi13 ness activities within a State during any taxable year 

14 merely— 

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

16 State, the solicitation of orders for sales or trans17 actions in such State, the furnishing of information 

18 to customers or affiliates in such State, or the cov19 erage of events or other gathering of information in 

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

21 independent contractors; 

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

23 in such State by one or more independent contrac24 tors whose activities on behalf of such person in 

25 such State consist solely of making sales or fulfilling 


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1 transactions, soliciting order for sales or trans2 actions, the furnishing of information to customers 

3 or affiliates, or the coverage of events or other gath4 ering of information; or 

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

6 to an independent contractor by such person ancil7 lary to the solicitation of orders or transactions by 

8 the independent contractor on behalf of such per9 son.’’; and 

10 (6) in subsection (d)(1)— 

11 (A) by inserting ‘‘or fulfilling trans12 actions,’’ after ‘‘selling’’; and 

13 (B) by striking ‘‘the sale of, tangible per14 sonal property’’ and inserting ‘‘a sale or trans15 action, furnishing information, or covering 

16 events, or otherwise gathering information’’. 

17 (b) APPLICATION OF PROHIBITIONS TO OTHER BUSI18 NESS ACTIVITY TAXES.—Title I of the Act entitled ‘‘An 

19 Act relating to the power of the States to impose net in20 come taxes on income derived from interstate commerce, 

21 and authorizing studies by congressional committees of 

22 matters pertaining thereto’’, approved September 14, 

23 1959, (15 U.S.C. 381 et seq.) is amended by adding at 

24 the end the following: 


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

2 January 1, 2009, the prohibitions of section 101 that 

3 apply with respect to net income taxes shall also apply 

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

5 in section 3(g) of the Business Activity Tax Simplification 

6 Act of 2008. A State or political subdivision thereof may 

7 not assess or collect any tax which by reason of this sec8 tion the State or political subdivision may not impose.’’. 

9 (c) EFFECTIVE DATE.—The amendments made by 

10 this section shall apply with respect to the imposition, as11 sessment, and collection of taxes for taxable periods begin12 ning on or after January 1, 2009. 

13 SEC. 3. MINIMUM JURISDICTIONAL STANDARD FOR STATE 

14 AND LOCAL NET INCOME TAXES AND OTHER 

15 BUSINESS ACTIVITY TAXES. 

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

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

18 tax or other business activity tax on any person relating 

19 to such person’s activities in interstate commerce unless 

20 such person has a physical presence in the State during 

21 the taxable period with respect to which the tax is im22 posed. 

23 (b) REQUIREMENTS FOR PHYSICAL PRESENCE.— 

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

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


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1 if such person’s business activities in the State in2 clude any of the following during such person’s tax3 able year: 

4 (A) Being an individual physically in the 

5 State, or assigning one or more employees to be 

6 in the State. 

7 (B) Using the services of an agent (exclud8 ing an employee) to establish or maintain the 

9 market in the State, if such agent does not per10 form business services in the State for any 

11 other person during such taxable year. 

12 (C) The leasing or owning of tangible per13 sonal property or of real property in the State. 

14 (2) DE MINIMIS PHYSICAL PRESENCE.—For 

15 purposes of this section, the term ‘‘physical pres16 ence’’ shall not include— 

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

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

19 days if provided by State law); or 

20 (B) presence in a State to conduct limited 

21 or transient business activity. 

22 (c) TAXABLE PERIODS NOT CONSISTING OF A

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

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


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1 for establishing physical presence under this Act shall be 

2 adjusted pro rata accordingly. 

3 (d) MINIMUM JURISDICTIONAL STANDARD.—This 

4 section provides for minimum jurisdictional standards and 

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

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

7 allowing persons to conduct greater activities without the 

8 imposition of tax jurisdiction. 

9 (e) EXCEPTIONS.— 

10 (1) DOMESTIC BUSINESS ENTITIES AND INDI11 VIDUALS DOMICILED IN, OR RESIDENTS OF, THE

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

13 to— 

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

15 that is incorporated or formed under the laws 

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

17 the tax is imposed; or 

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

19 resident of, the State in which the tax is im20 posed. 

21 (2) TAXATION OF PARTNERS AND SIMILAR PER22 SONS.—This section shall not be construed to modify 

23 or affect any State business activity tax liability of 

24 an owner or beneficiary of an entity that is a part25 nership, an S corporation (as defined in section 


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1 1361 of the Internal Revenue Code of 1986), a lim2 ited liability company (classified as a partnership for 

3 Federal income tax purposes), a trust, an estate, or 

4 any other similar entity, if the entity has a physical 

5 presence in the State in which the tax is imposed. 

6 (3) PRESERVATION OF AUTHORITY.—This sec7 tion shall not be construed to modify, affect, or su8 persede the authority of a State to bring an enforce9 ment action against a person or entity that may be 

10 engaged in an illegal activity, a sham transaction, or 

11 any perceived or actual abuse in its business activi12 ties if such enforcement action does not modify, af13 fect, or supersede the operation of any provision of 

14 this section or of any other Federal law. 

15 (f) RULE OF CONSTRUCTION.—This section shall not 

16 be construed to modify, affect, or supersede the operation 

17 of title I of the Act entitled ‘‘An Act relating to the power 

18 of the States to impose net income taxes on income derived 

19 from interstate commerce, and authorizing studies by con20 gressional committees of matters pertaining thereto’’, ap21 proved September 14, 1959 (15 U.S.C. 381 et seq.). 

22 (g) DEFINITIONS, ETC.—For purposes of this section: 

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

24 tax’’ has the meaning given that term for the pur25 poses of the Act entitled ‘‘An Act relating to the 


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1 power of the States to impose net income taxes on 

2 income derived from interstate commerce, and au3 thorizing studies by congressional committees of 

4 matters pertaining thereto’’, approved September 

5 14, 1959 (15 U.S.C. 381 et seq.). 

6 (2) OTHER BUSINESS ACTIVITY TAX.— 

7 (A) IN GENERAL.—The term ‘‘other busi8 ness activity tax’’ means any tax in the nature 

9 of a net income tax or tax measured by the 

10 amount of, or economic results of, business or 

11 related activity conducted in the State. 

12 (B) EXCLUSION.—The term ‘‘other busi13 ness activity tax’’ does not include a sales tax, 

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

15 on the sale or acquisition of goods or services, 

16 whether or not denominated a tax imposed on 

17 the privilege of doing business. 

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

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

20 the United States Code. 

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

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

23 territory or possession of the United States, or any 

24 political subdivision of any of the foregoing. 


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1 (5) TANGIBLE PERSONAL PROPERTY.—For pur2 poses of subsection (b)(1)(C), the leasing or owning 

3 of tangible personal property does not include the 

4 leasing or licensing of computer software. 

5 (h) EFFECTIVE DATE.—This section shall apply with 

6 respect to taxable periods beginning on or after January 

7 1, 2009. 

Æ 


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