Support Business Activity Tax Simplification

Physical presence (having an office or place of business in the state, or employing workers that operate within the state) tends to govern imposition of sales and use tax collections. With respect to other forms of taxation such as income or franchise taxes, however, states now are seeking to impose taxes based on an "economic nexus."

Under this theory, simply the provision of services over the Internet to repair a computer or adjust a software program could trigger taxation despite no physical nexus to the state in question. This will usher in a burdensome and complex new multiplicity of tax regimes for all businesses but seems to pose a particularly high burden on the IT industry and the tech SMB.

Policy Goal: Congress should enact a distinct physical presence requirement as a prerequisite for the taxation of interstate business activities. Accordingly, CompTIA supports legislation consistent with S. 1726, the “Business Activity Tax Simplification Act of 2007” and its companion bill, H.R. 5267, the “Business Activity Tax Simplification Act of 2008,” both of which were introduced in the 111th Congress.