I 
108TH CONGRESS 
1ST SESSION H. R. 3220
To regulate certain State taxation of interstate commerce, and for other 
purposes. 
IN THE HOUSE OF REPRESENTATIVES 
OCTOBER 1, 2003
Mr. GOODLATTE (for himself, Mr. BOUCHER, Mr. BOEHNER, Mr. SMITH of 
Texas, Mr. CHABOT, Mr. FORBES, Ms. PRYCE of Ohio, Mr. RAMSTAD, 
Mr. WILSON of South Carolina, Mr. TIBERI, and Mr. BARRETT of South 
Carolina) introduced the following bill; which was referred to the Com-
mittee on the Judiciary 
A BILL 
To regulate certain State taxation of interstate commerce, 
and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Business Activity Tax 
Simplification Act of 2003’’. 
SEC. 2. REMOVAL OF CERTAIN LIMITATIONS ON THE AP-
PLICATION OF PUBLIC LAW 86–272. 
(a) SOLICITATIONS WITH RESPECT TO SALES OF 
OTHER THAN TANGIBLE PERSONAL PROPERTY.—Section
101 of the Act entitled ‘‘An Act relating to the power of 
the States to impose net income taxes on income derived 
from interstate commerce, and authorizing studies by con-
gressional committees of matters pertaining thereto’’, ap-
proved September 14, 1959 (15 U.S.C. 381 et seq.) is 
amended—
(1) in subsections (a) and (c), by striking ‘‘of 
tangible personal property’’; and 
(2) in subsection (d) by striking ‘‘the sale of, 
tangible personal property’’ and inserting ‘‘a sale,’’. 
(b) APPLICATION OF PROHIBITIONS TO OTHER BUSI-
NESS ACTIVITY TAXES.—Title I of the Act entitled ‘‘An 
Act relating to the power of the States to impose net in-
come taxes on income derived from interstate commerce, 
and authorizing studies by congressional committees of 
matters pertaining thereto’’, approved September 14, 
1959 (15 U.S.C. 381 et seq.) is amended by adding at 
the end the following: 
‘‘SEC. 105. Beginning with taxable periods beginning 
on or after the first day of the first calendar year that 
begins after the date of the enactment of the Business 
Activity Tax Simplification Act of 2003, the prohibitions 
of section 101 that apply with respect to net income taxes 
shall also apply with respect to each other business activity 
tax, as defined in section 4 of the Business Activity Tax
Simplification Act of 2003. A State or subdivision may 
not assess or collect any tax which by reason of this sec-
tion the State or subdivision may not impose.’’. 
(c) EFFECTIVE DATE OF SUBSECTION (a) AMEND-
MENTS.—The amendments made by subsection (a) shall 
apply with respect to the imposition, assessment, and col-
lection of taxes for taxable periods beginning on or after 
the first day of the first calendar year that begins after 
the date of the enactment of the Business Activity Tax 
Simplification Act of 2003. 
SEC. 3. JURISDICTIONAL STANDARD FOR STATE AND 
LOCAL NET INCOME TAXES AND OTHER BUSI-
NESS ACTIVITY TAXES. 
(a) IN GENERAL.—Except as otherwise provided by 
this Act, no taxing authority of a State shall have power 
to impose, assess, or collect a net income tax or other busi-
ness activity tax on any person relating to such person’s 
activities in interstate commerce, unless such person has 
a physical presence in the State during the taxable period 
with respect to which the tax is imposed. 
(b) REQUIREMENTS FOR PHYSICAL PRESENCE.—Ex-
cept as otherwise provided by this Act, for the purposes 
of subsection (a), a person has a physical presence in a 
State only if such person’s business activities within such
State include any of the following during the person’s tax-
able year: 
(1) Being an individual physically within the 
State, or assigning one or more employees to be in 
such State, on more than 21 days. However, the fol-
lowing shall be disregarded in determining whether 
such 21-day limit has been exceeded: 
(A) Activities in connection with a possible 
purchase of goods or services for the business. 
(B) Gathering news and covering events 
for print, broadcast, or other distribution 
through the media. 
(C) Meeting government officials for pur-
poses other than selling goods or services. 
(D) Participation in educational or train-
ing conferences, seminars or other similar func-
tions. 
(E) Participating in charitable activities. 
(2) Using the services of another person, except 
an employee, in such State, on more than 21 days 
to establish or maintain the market in that State, 
unless that other person performs similar functions 
on behalf of at least one additional business entity 
during the taxable year.
(3) The leasing or owning of tangible personal 
property or real property in such State on more than 
21 days. However, the following shall be disregarded 
in determining whether such 21-day limit has been 
exceeded: 
(A) Tangible property located in the State 
for purposes of being assembled, manufactured, 
processed, or tested by another person for the 
benefit of the owner or lessee, or used to fur-
nish a service to the owner or lessee by another 
person. 
(B) Marketing or promotional materials 
distributed in a State using mail or a common 
carrier, or as inserts in or components of publi-
cations. 
(C) Any property to the extent used ancil-
lary to an activity excluded from the computa-
tion of the 21-day period under paragraph (1) 
or (2). 
(c) TAXABLE
PERIODS
NOT
CONSISTING
OF
A 
YEAR.—If the taxable period for which the tax is imposed 
is not a year, then any requirements expressed in days 
for establishing physical presence under this Act shall be 
adjusted pro rata accordingly. 
(d) EXCEPTIONS.—
(1) DOMESTIC BUSINESS ENTITIES AND INDI-
VIDUALS DOMICILED IN THE STATE.—Subsection (a) 
does not apply with respect to—
(A) a person (other than an individual) 
that is incorporated or formed under the laws 
of the State or commercially domiciled in the 
State in which the tax is imposed; or 
(B) an individual who is domiciled in the 
State. 
(2) TAXATION OF PARTNERS AND SIMILAR PER-
SONS.—If a taxing authority is not prohibited by 
this section from taxing an entity that is a partner-
ship, a Subchapter S corporation, a limited liability 
company, a trust, or an estate, or another similar 
entity, that taxing authority is also not prohibited by 
this section from taxing the owners or beneficiaries 
of the entity, if State law imposes the tax not on the 
entity itself but on the entity’s owners or bene-
ficiaries, whether or not they are in the State, with 
respect to their ownership interest in the entity. 
(3) CERTAIN ACTIVITIES.—With respect to the 
following, subsection (b) shall be read by sub-
stituting ‘‘one day’’ for ‘‘more than 21 days’’: 
(A) The sale within the State of tangible 
personal property, where delivery of the prop-
erty originates and is completed within that 
State. 
(B) The performance of services to real 
property within the State. 
(4) EXCEPTION
RELATING
TO
CERTAIN
PER-
FORMANCES AND SPORTING EVENTS.—With respect 
to the taxation of one of the following, subsection (b) 
shall be read by substituting ‘‘one day’’ for ‘‘more 
than 21 days’’: 
(A) A live performance in the State, before 
a live audience of more than 100 individuals. 
(B) A live sporting event in the State be-
fore more than 100 spectators present at the 
event. 
SEC. 4. DEFINITIONS. 
The following definitions apply in this Act: 
(1) NET INCOME TAX.—The term ‘‘net income 
tax’’ has the meaning given that term for the pur-
poses of the Act entitled ‘‘An Act relating to the 
power of the States to impose net income taxes on 
income derived from interstate commerce, and au-
thorizing studies by congressional committees of 
matters pertaining thereto’’, approved September 
14, 1959 (15 U.S.C. 381 et seq.). 
(2) OTHER BUSINESS ACTIVITY TAX.—
(A) The term ‘‘other business activity tax’’ 
means—
(i) a tax imposed on or measured by 
gross receipts, gross income, or gross prof-
its; 
(ii) a business licence tax; 
(iii) a business and occupation tax; 
(iv) a franchise tax; 
(v) a single business tax or a capital 
stock tax; or 
(vi) any other tax imposed by a State 
on a business for the right to do business 
in that State or measured by the amount 
of, or economic results of, business or re-
lated activity conducted in that State. 
(B) The term ‘‘other business activity tax’’ 
does not include a transaction tax. 
(3) STATE.—The term ‘‘State’’ means any of 
the several States, the District of Columbia, or any 
territory or possession of the United States, and any 
political subdivision thereof. 
SEC. 5. GENERAL MATTERS. 
(a) RULE OF CONSTRUCTION.—The limitation on the 
power of a State imposed by section 3 does not affect any 
other limitation on that power imposed by other law.
(b) EFFECTIVE DATE.—This Act applies with respect 
to taxable periods beginning on and after the first day of 
the first year that begins after the date of enactment of 
this Act.
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