II 

110TH CONGRESS 

2D SESSION S. 3670 

To regulate certain State and local taxation of electronic commerce, and 

for other purposes. 

IN THE SENATE OF THE UNITED STATES 

OCTOBER 1 (legislative day, SEPTEMBER 17), 2008 

Mr. BUNNING introduced the following bill; which was read twice and referred 

to the Committee on Commerce, Science, and Transportation 

A BILL 

To regulate certain State and local taxation of electronic 

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. MINIMUM JURISDICTIONAL STANDARD FOR 

4 STATE AND LOCAL TAXES ON ELECTRONIC 

5 COMMERCE. 

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

7 shall have power to require the collection and remittance 

8 of a State tax by any person resulting from the electronic 

9 commerce of such person unless such person has a physmstockstill on PROD1PC66 with BILLS

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1 ical presence in the State during the taxable period with 

2 respect to which the tax is imposed. 

3 (b) REQUIREMENTS FOR PHYSICAL PRESENCE.— 

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

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

6 if such person’s electronic commerce in the State in7 cludes any of the following during such person’s tax8 able year: 

9 (A) Being an individual physically in the 

10 State, or assigning one or more employees to be 

11 in the State. 

12 (B) Using the services of an agent (exclud13 ing an employee) to establish or maintain the 

14 electronic commerce in the State, if such agent 

15 does not perform the same services in the State 

16 for any other person during such taxable year. 

17 (C) The leasing or owning of tangible per18 sonal property or of real property in the State. 

19 (2) DE MINIMIS PHYSICAL PRESENCE.—For 

20 purposes of this section, the term ‘‘physical pres21 ence’’ shall not include— 

22 (A) entering into an agreement to share 

23 revenue generated by an electronic commerce 

24 presence owned or maintained by a person who 

25 is physically present in a State; 

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1 (B) presence in a State for less than 15 

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

3 days if provided by State law); and 

4 (C) presence in a State to conduct limited 

5 or transient business activity. 

6 (c) TAXABLE PERIODS NOT CONSISTING OF A

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

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

9 for establishing physical presence under this Act shall be 

10 adjusted pro rata accordingly. 

11 (d) MINIMUM JURISDICTIONAL STANDARD.—This 

12 section provides for minimum jurisdictional standards and 

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

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

15 allowing persons to conduct greater activities without the 

16 imposition of tax jurisdiction. 

17 (e) EXCEPTIONS.— 

18 (1) DOMESTIC BUSINESS ENTITIES AND INDI19 VIDUALS DOMICILED IN, OR RESIDENTS OF, THE

20 STATE.—Subsection (a) shall not apply with respect 

21 to— 

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

23 that is incorporated or formed under the laws 

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

25 the tax is imposed; or 

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

2 resident of, the State in which the tax is im3 posed. 

4 (2) PRESERVATION OF AUTHORITY.—This sec5 tion shall not be construed to modify, affect, or su6 persede the authority of a State to bring an enforce7 ment action against a person or entity that may be 

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

9 any perceived or actual abuse in its electronic com10 merce if such enforcement action does not modify, 

11 affect, or supersede the operation of any provision of 

12 this section or of any other Federal law. 

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

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

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

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

17 from interstate commerce, and authorizing studies by con18 gressional committees of matters pertaining thereto’’, ap19 proved September 14, 1959 (15 U.S.C. 381 et seq.). 

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

21 (1) ELECTRONIC COMMERCE.—The term ‘‘elec22 tronic commerce’’ has the meaning given that term 

23 in section 1105(3) of the Internet Tax Freedom Act 

24 (47 U.S.C. 151 note). 

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1 (2) PERSON.—The term ‘‘person’’ has the 

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

3 the United States Code. 

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

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

6 territory or possession of the United States, or any 

7 political subdivision of any of the foregoing. 

8 (4) TANGIBLE PERSONAL PROPERTY.—For pur9 poses of subsection (b)(1)(C), the leasing or owning 

10 of tangible personal property does not include the 

11 leasing or licensing of computer software. 

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

13 respect to taxable periods beginning on or after January 

14 1, 2009. 

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