The House Judiciary Committee’s Subcommittee on Commercial and Administrative Law will hold a hearing Tuesday afternoon on H.R. 5267, the Business Activity Tax Simplification Act of 2008.
Mark Ducharne, vice president and chief financial officer of Monterey Boats in Williston, Fla., is scheduled to testify at the hearing. He will support the passage of this legislative bill, which promises to aid small businesses throughout the country.
The National Marine Manufacturers Association has worked to educate the House Judiciary Committee on the need to hold fair and open hearings on the Business Activity Tax and state tax nexus issues and their increasingly negative impacts on small U.S. businesses.
The interstate commerce issues are significant, according to the NMMA. With no “bright-line” test to prevent states from crossing borders, and essentially taxing money from out-of-state businesses, the adverse impact to small business growth is quite severe, says the NMMA.
As states have grown increasingly aggressive in pursuing vague tax nexuses, the NMMA says it has heard from an increasing number of manufacturers that have been caught up in state schemes to assess taxes on businesses that do not have “bricks and mortar” presences in those states. H.R. 5267 was introduced Feb. 7 by U.S. Reps. Rick Boucher, D-Va., and Bob Goodlatte, R-Va.
It would set forth a bright-line standard, clarifying that states and localities can collect business activity taxes from out-of-state entities only when they have a physical presence in the taxing state. The legislation would also modernize Public Law 86-272, which Congress enacted 49 years ago. As written, that law prohibits states from assessing net income-based taxes against a business when its only contact with the state involves the solicitation of orders in the state for tangible personal property.
BATSA would modernize P.L. 86-272, so that in addition to tangible personal property it would also apply to intangible property and services. Furthermore, it would apply to all direct taxes on a business, not just those based on net income.
In preparation for Tuesday’s hearing, the Coalition to Protect Interstate Commerce was expected to have hosted a national media teleconference at 2 p.m. today on BATSA. This briefing will provide information on the pending legislation and the impact of nexus issues on interstate operations.
Participants include Bob Selig, president and CEO of Davis Instruments in Hayward, Calif.; Rebecca Boenigk, CEO and chairman of the board for Neutral Posture in Bryan, Texas; and Todd Lard, general counsel for the Council on State Taxation.