IB 
Union Calendar No. 330 
109TH CONGRESS 
2D SESSION 
H. R. 1956 
[Report No. 109–575] 
To regulate certain State taxation of interstate commerce; and for other 
purposes. 
IN THE HOUSE OF REPRESENTATIVES 
APRIL 28, 2005 
Mr. GOODLATTE (for himself, Mr. BOUCHER, Mr. CROWLEY, Mr. FORBES, 
Mr. MEEKS of New York, Mr. CHABOT, Mr. BACHUS, Mr. BOEHNER, 
Mrs. DRAKE, Mr. TIBERI, Mr. CANTOR, Mr. MORAN of Virginia, and Mr. 
SMITH of Texas) introduced the following bill; which was referred to the 
Committee on the Judiciary 
JULY 17, 2006 
Additional sponsors: Mrs. BLACKBURN, Mr. WILSON of South Carolina, Mr. 
UPTON, Mr. GALLEGLY, Mr. CARTER, Mr. SOUDER, Mr. RAMSTAD, Mr. 
KING of Iowa, Ms. HART, Mr. COLE of Oklahoma, Mr. GARRETT of New 
Jersey, Mr. BARRETT of South Carolina, Mr. PENCE, Mrs. JO ANN 
DAVIS of Virginia, Mr. LATHAM, Mr. MARCHANT, Mr. BROWN of South 
Carolina, Mr. ROGERS of Kentucky, Mr. KOLBE, Mr. FLAKE, Mr. 
FRANKS of Arizona, Mr. ENGLISH of Pennsylvania, Ms. HERSETH, Mr. 
MURPHY, Mr. BISHOP of Utah, Mr. JENKINS, Mr. FEENEY, and Mr. 
DANIEL E. LUNGREN of California 
JULY 17, 2006 
Reported with an amendment, committed to the Committee of the Whole 
House on the State of the Union, and ordered to be printed 
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[Strike out all after the enacting clause and insert the part printed in italic] 
[For text of introduced bill, see copy of bill as introduced on April 28, 2005] 
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 2006’’. 
SEC. 2. REMOVAL OF CERTAIN LIMITATIONS ON THE APPLI-
CATION OF PUBLIC LAW 86–272. 
(a) SOLICITATIONS WITH RESPECT TO SALES AND 
TRANSACTIONS
OF OTHER THAN TANGIBLE PERSONAL 
PROPERTY.—Section 101 of the Act entitled ‘‘An Act relat-
ing to the power of the States to impose net income taxes 
on income derived from interstate commerce, and author-
izing studies by congressional committees of matters per-
taining thereto’’, approved September 14, 1959 (15 U.S.C. 
381 et seq.) is amended— 
(1) in subsection (a)(1) by striking ‘‘of tangible’’ 
and all that follows through ‘‘State; and’’ and insert-
ing the following: 
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‘‘or transactions, which orders are sent outside the 
State for approval or rejection and, if approved, 
are— 
‘‘(A) in the case of tangible personal prop-
erty, filled by shipment or delivery from a point 
outside the State; and 
‘‘(B) in the case of all other forms of prop-
erty, services, and other transactions, fulfilled 
from a point outside the State; 
and’’; 
(2) in subsection (c)— 
(A) by inserting ‘‘or fulfilling transactions’’ 
after ‘‘making sales’’; 
(B) by inserting ‘‘or transactions’’ after 
‘‘sales’’ the other places it appears; 
(C) by striking ‘‘of tangible personal prop-
erty’’ the first place it appears; and 
(D) by striking ‘‘, of tangible personal prop-
erty’’; and 
(3) in subsection (d)(1) by striking ‘‘the sale of, 
tangible personal property’’ and inserting ‘‘a sale or 
transaction,’’. 
(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 income 
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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.) 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 be-
gins after the date of the enactment of the Business Activity 
Tax Simplification Act of 2006, 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 Sim-
plification Act of 2006. A State or political subdivision 
thereof may not assess or collect any tax which by reason 
of this section the State or political 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 collec-
tion 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 Simplifica-
tion Act of 2006. 
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SEC. 3. JURISDICTIONAL STANDARD FOR STATE AND 
LOCAL NET INCOME TAXES AND OTHER BUSI-
NESS ACTIVITY TAXES. 
(a) IN GENERAL.—No taxing authority of a State shall 
have power to impose, assess, or collect a net income tax 
or other business activity tax on any person relating to such 
person’s activities in interstate commerce unless such per-
son has a physical presence in the State during the taxable 
period with respect to which the tax is imposed. 
(b) REQUIREMENTS FOR PHYSICAL PRESENCE.—For 
the purposes of subsection (a), a person has a physical pres-
ence in a State only if such person’s business activities in 
the State include any of the following, collectively and on 
more than 21 days in the aggregate, during such person’s 
taxable year: 
(1) Being an individual physically in the State, 
or assigning one or more employees to be in the State, 
except that the following shall be excluded in deter-
mining whether such 21-day limit has been exceeded: 
(A) Activities in connection with a possible 
or an actual purchase of goods or services, for 
consumption by the person’s business. 
(B) Gathering news for print, broadcast, or 
other distribution through the news media. 
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(C) Meeting government officials for pur-
poses other than selling goods or services, for con-
sumption by such government. 
(D) Merely attending educational or train-
ing conferences, seminars or other similar func-
tions. 
(E) Nonprofit participation in charitable 
activities. 
(2) Using the services of an agent (excluding an 
employee) to establish or maintain the market in the 
State, if such agent does not perform business services 
in the State for any other person during such taxable 
year. 
(3) The leasing or owning of tangible personal 
property or of real property in the State, except that 
the following shall be excluded in determining whether 
such 21-day limit has been exceeded: 
(A) Tangible personal property located in 
the State for purposes of being assembled, manu-
factured, processed, or tested by another person 
for the benefit of the owner or lessee, or used to 
furnish a service to the owner or lessee by an-
other person. 
(B) Marketing or promotional materials 
distributed in the State. 
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(C) Any property to the extent used ancil-
lary to an activity excluded from the computa-
tion of the 21-day period based on 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 estab-
lishing physical presence under this Act shall be adjusted 
pro rata accordingly. 
(d) EXCEPTIONS.— 
(1) DOMESTIC BUSINESS ENTITIES AND INDIVID-
UALS
DOMICILED
IN, 
OR
RESIDENTS
OF, 
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 domiciled in the State) in which 
the tax is imposed; or 
(B) an individual who is domiciled in, or 
a resident of, the State in which the tax is im-
posed. 
(2) TAXATION OF PARTNERS AND SIMILAR PER-
SONS.—This section shall not be construed to modify 
or affect any State business activity tax liability of 
an owner or beneficiary of an entity that is a part-
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nership, an S corporation (as defined in section 1361 
of the Internal Revenue Code of 1986 (26 U.S.C. 
1361)), a limited liability company, a trust, an es-
tate, or any other similar entity, if the entity has a 
physical presence in the State in which the tax is im-
posed. 
(3) PRESERVATION OF AUTHORITY.—This section 
shall not be construed to modify, affect, or supersede 
the authority of a State to bring an enforcement ac-
tion against a person or entity that may be engaged 
in an illegal activity, a sham transaction, or any 
perceived or actual abuse in its business activities if 
such enforcement action does not modify, affect, or su-
persede the operation of any provision of this Act or 
of any other Federal law. 
(4) CERTAIN ACTIVITIES.—With respect to the 
following, subsection (b) shall be read by substituting 
‘‘at least one day’’ for ‘‘more than 21 days in the ag-
gregate’’: 
(A) The sale within a State of tangible per-
sonal property, if delivery of the property origi-
nates and is completed within the State. 
(B) The performance of services that phys-
ically affect real property within a State. 
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(5) EXCEPTION RELATING TO CERTAIN PERFORM-
ANCES AND SPORTING EVENTS.—With respect to the 
taxation of the following, subsection (b) shall be read 
by substituting ‘‘at least one day’’ for ‘‘more than 21 
days in the aggregate’’: 
(A) A live performance in a State, before a 
live audience of more than 100 individuals. 
(B) A live sporting event in a State before 
more than 100 spectators present at the event. 
(e) RULE OF CONSTRUCTION.—This section shall not 
be construed to modify, affect, or supersede the operation 
of title I 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.). 
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 purposes 
of the Act entitled ‘‘An Act relating to the power of 
the States to impose net income taxes on income de-
rived from interstate commerce, and authorizing stud-
ies by congressional committees of matters pertaining 
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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 profits; 
(ii) a business license 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 
the State or measured by the amount of, or 
economic results of, business or related ac-
tivity conducted in the State. 
(B) The term ‘‘other business activity tax’’ 
does not include a sales tax, a use tax, or a simi-
lar tax, imposed as the result of the sale or ac-
quisition of goods or services, whether or not de-
nominated a tax imposed on the privilege of 
doing business. 
(3) STATE.—The term ‘‘State’’ means any of the 
several States, the District of Columbia, or any terri-
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tory or possession of the United States, or any polit-
ical subdivision of any of the foregoing. 
(4) TANGIBLE PERSONAL PROPERTY.—The term 
‘‘tangible personal property’’ does not include com-
puter software that is owned and licensed by the 
owner to another person. 
SEC. 5. EFFECTIVE DATE. 
Except as provided otherwise in this Act, this Act ap-
plies 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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Union Calendar No. 330 
109TH CONGRESS 
2D SESSION 
H. R. 1956 
[Report No. 109–575] 
A BILL 
To regulate certain State taxation of interstate 
commerce; and for other purposes. 
JULY 17, 2006 
Reported with an amendment, committed to the Com-
mittee of the Whole House on the State of the Union, 
and ordered to be printed 
VerDate Aug 31 2005 
09:45 Jul 18, 2006
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