I 
109TH CONGRESS 
1ST SESSION H. R. 1956
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 
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 2005’’. 
SEC. 2. REMOVAL OF CERTAIN LIMITATIONS ON THE AP-
PLICATION 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 re-
lating to the power of the States to impose net income 
taxes on income derived from interstate commerce, and 
authorizing studies by congressional committees of mat-
ters pertaining thereto’’, approved September 14, 1959 
(15 U.S.C. 381 et seq.) is amended—
(1) in subsection (a)(1) by striking ‘‘of tan-
gible’’ and all that follows through ‘‘State; and’’ and 
inserting the following: 
‘‘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; and
(C) by striking ‘‘of tangible personal prop-
erty’’ each place it appears; and 
(3) in subsection (d) 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 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 2005, 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 2005. 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 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 2005. 
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 person has a physical presence in the State during 
the taxable period with respect to which the tax is im-
posed. 
(b) REQUIREMENTS FOR PHYSICAL PRESENCE.—For 
the purposes of subsection (a), a person has a physical 
presence in a State only if such person’s business activities 
within the State include any of the following during such 
person’s taxable year:
(1) Being an individual physically within the 
State, or assigning one or more employees to be in 
the State, on more than 21 days, except that 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 the State, on more than 21 days to 
establish or maintain the market in the State, unless 
such other person performs similar functions on be-
half of at least one additional business entity during 
the taxable year. 
(3) The leasing or owning of tangible personal 
property or of real property in the State on more 
than 21 days, except that the following shall be dis-
regarded in determining whether such 21-day limit 
has been exceeded:
(A) Tangible personal property located in 
the State for purposes of being assembled, man-
ufactured, processed, or tested by another per-
son for the benefit of the owner or lessee, or 
used to furnish a service to the owner or lessee 
by another person. 
(B) Marketing or promotional materials 
distributed in the 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