Business Activity Tax Legislation Moves Forward

The House Judiciary Committee favorably reported out H.R. 1439, the "Business Activity Tax Simplification Act of 2011," by a voice vote yesterday. Now, this legislation can be considered by the full House, although the timetable is uncertain.

This legislation sets up a physical presence nexus standard, which means that in order for a state to tax a business activity, that business must have a tangible connection to the state, such as an office or a sales force. Without this legislation, businesses will face increasing tax compliance costs, as states seek additional revenues.

CompTIA has long-supported this legislation. We believe it is principally unfair for a state attempt to tax a transaction when that business has no physical presence in the taxing state. The bottom line here for small businesses is: Without this legislation, state tax controversies and resulting compliance costs will continue to increase.

Small businesses are already saturated with tax compliance burden; requiring a business to submit to the taxing requirements of multiple states – when that business has no presence in that state – would make it economically impossible for a small business to grow and prosper in our online world.

We now will work to encourage leadership to take up this legislation for passage by the full House.