Liberal group slams business tax measure

In general, BATSA would apply what its supporters dub a “bright line” test, saying that a business would have a physical presence in a state if it owns or leases property there or has at least one employee working in the state for 15 days or more a taxable year. 

The measure, versions of which have been introduced for the last several Congresses, deals with corporate income and other business taxes, but not sales tax. Sen. Dick Durbin (D-Ill.) is getting set to push legislation that would deal with sales tax for Internet purchases. 

BATSA’s backers say the need for clarification also has become even more necessary of late, as technology has expanded companies’ ability to expand their reach and with states having differing interpretations of when an out-of-state business can be taxed. A long list of business groups and corporations expressed their support for the bill in a letter of their own last week. 

But CTJ says the legislation would spark more aggressive business tax planning and basically allow the government to pick business winners and losers, giving larger companies the chance to use loopholes to get around the physical presence benchmark that smaller companies could not use. 

The group and state tax collectors also say that the bill would hamstring revenue collection efforts for state and local governments at a time when many of them are strapped for cash. 

In testimony prepared for a House panel last month, Bruce Johnson, the Utah tax commissioner, cited a 2005 study from the National Governors Association that said an earlier version of the legislation would cause between $4.7 billion and $8 billion in lost revenues for states. 

CTJ also says that the physical presence standard is outdated in the Internet age – with Robert McIntyre, the group’s director, telling The Hill that BATSA essentially “codifies the Supreme Court’s mistake.”

“Companies that ship products into a state benefit from the roads that facilitate delivery, the state and local courts that are used to enforce contracts, and the telephone and cable lines that are regulated by state agencies,” McIntyre wrote in his letter to Reps. Howard Coble (R-N.C.) and Steve Cohen (D-Tenn.), the chairman and ranking member of the House Judiciary subcommittee on commercial and administrative law. 

For his part, Goodlatte rejected the tax group’s argument that BATSA would increase complexity, calling it “totally lacking in credibility.”

“Instead of dealing with this on a case-by-case basis, debating and fighting over it and litigating it, this bill spells out exactly what a physical presence is,” Goodlatte told The Hill. 

The Virginia Republican added that the bill, which has attracted a handful of cosponsors since being introduced about a month ago, once again had bipartisan support and that he expected it to “do well” this Congress. 

The business tax measure has been introduced in Congress dating back to at least 2003, with Rep. Bobby Scott of Virginia among the House Democrats backing it this time around. 

Only once in that span, in 2006, has the measure made it out of the House Judiciary Committee. A spokesman for that panel did not respond to a request for comment on the bill’s chances in the current Congress.

Sens. Chuck Schumer (D-N.Y.) and Mike Crapo (R-Idaho) introduced a version of the legislation in their chamber in 2007.