Download Special Report No. 162
Special Report No. 162
Key Findings
• States are shifting tax burdens to out-of-state companies with an aggressive interpretation of business taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. obligation. This trend is causing significant economic and administrative problems.
• Businesses are left uncertain about where they will be subject to tax, suppressing investment and disrupting interstate commerce.
• BATSA legislation would establish that businesses could only be subject to business taxes in states where they have property and employees for at least 15 days in a year. This “physical presence” requirement is a binding legal precedent, but many states are effectively enforcing “economic presence” standards that trigger tax obligations where customers are located, not where the company’s property and employees are located.
• Estimates of multi-billion dollar losses associated with BATSA legislation are based on a flawed survey of 34 states, with divergent answers due to different state interpretations of revenue impacts. Additionally, the revenue forecast ignores offsetting revenue increases, such as from throwback rules.
• The benefits of living in a state accrue to the people and businesses that reside there. When a state starts reaching beyond its borders to tax out-of-state companies, it is admitting that its state government services are a product in-state residents are unwilling to buy at their current cost.
• Co-sponsors of both parties spoke about the importance of clarity in the law and congressional action to resolve the issue.
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