The United States House Judiciary Committee approved legislation which aims to simplify the collection of business taxes across state lines.
The Business Activity Tax Simplification Act was designed to resolve the issue of states seeking to collect business activity taxes from businesses located in other states.
The act sets specific guidelines for when an out-of-state business can be charged a tax for business done within another state.
Many states have recently sought to collect business activity taxes from businesses in other states.
The problem has been that different states use different standards for determining what justifies taxation.
The bill's sponsor, Rep.
Bob Goodlatte (R-VA), explains that the differences between states has resulted in businesses being deterred from expansion into other states for fear of taxation.
The issue is of specific concern for internet-based companies.
"This legislation sets specific guidelines for when an out-of-state business may be charged a tax for doing business in a state," Goodlatte said.
"This legislation focuses on allowing the Internet and the commerce that it facilitates to expand, by eliminating excessive taxes that harm on-line growth.
" The bill creates a "bright line" test to determine whether or not an out-of-state business is obligated to pay taxes to another jurisdiction.
There would also be a physical presence test established.
For example, a state may only tax an out-of-state business if the out-of-state business has a physical presence in the taxing state.
This physical presence could be defined as leasing or owning real or tangible property in the state or the assignment of one or more employees in the state for over 21 days.
The bill should be voted upon by the House by the end of summer.