With the Republican National Convention wrapping up and the Democrat’s national soiree about to begin, the broad outlines of party platforms on tax policy are beginning to emerge. One of the few things on which both parties seem to agree is the need for significant tax reform. While much of the attention is on federal issues, neither President Obama nor Mitt Romney has said where he stands on pending federal bills that would bring about fundamental changes in state taxation.
The state tax related federal legislation that has received the most attention from the press (and this blog) are the so-called “Amazon” bills, which would grant states the authority to collect sales tax from vendors that lack a physical presence within their borders.
But other important federal measures have received less attention—even though some of them have resulted in greater legislative action. Below is a short re-cap of each of those bills:
Mobile Workforce State Income Tax Simplification Act of 2012 (H.R. 1864): would set 30 days as the threshold for when states can tax earnings for nonresident workers. In most states, it is unclear if the obligation to withhold payroll begins on the first day a nonresident works within its borders or sometime thereafter. The legislation passed the House in May.
Business Activity Tax Simplification Act of 2011(H.R. 1439): known as the “BATSA bill,” the legislation would, among other things, establish a bright line standard for when a state can impose a net income tax or other business activity tax on interstate activities. It would define “physical presence in a state” to exclude a presence of less than 15 days within a jurisdiction’s borders or transient business activities. The BATSA bill recently received favorable coverage in a Fiscal Times storyabout a company that was hit with an assessment in Nebraska as a result of driving its trucks through the state. The legislation has been pending in the House since November 2011.
Permanent InternetTaxFreedomAct of 2011 (S. 135): with the InternetTaxFreedomAct set to expire in 2014, this bill would make permanent the ban on state and local taxation of internet access and on multiple or discriminatory taxes on electronic commerce. The ITFA is sometimes misconstrued as a tax ban on products sold over the internet as opposed to a narrower prohibition against levies on internet access. Among the issues to be considered are whether such a ban is still necessary and the types of technologies that meet the definition of “electronic commerce.” The bill has been pending in the Senate Finance Committee since January 2011.
By Steven Roll
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