Summary: H.R.1956 — 109th Congress (2005-2006)All Information (Except Text)

Bill summaries are authored by CRS.

Shown Here:
Reported to House with amendment(s) (07/17/2006)

Business Activity Tax Simplification Act of 2006 - Extends the general federal prohibition against state taxation (i.e., net income taxation) of interstate commerce to include taxation of out-of-state transactions involving all forms of property, including intangible personal property and services (currently, only sales of tangible personal property are protected). Extends such prohibition to other business activity taxes (defined as taxes imposed on or measured by gross receipts, gross income, or gross profits, a business license tax, a business and occupation tax, a franchise tax, a single business tax or a capital stock tax, or any other tax based on business activity).

Prohibits state taxation of activities in interstate commerce unless the taxpayer has a physical presence in the taxing state. Defines "physical presence in a state" to mean business and leasing activities for more than 21 days in the taxing state. Disregards in determining such 21-day period: (1) activities relating to the purchase of goods or services for a business; (2) news-gathering activities; (3) certain meetings with government officials; (4) attending educational or training conferences; or (5) participation in charitable activities. Reduces the 21-day period to one day for: (1) live performances and sporting events in the taxing state when the audience is more than 100 individuals; (2) sales of tangible personal property made in the taxing state if delivery is completed in such state; and (3) the performance of services that physically affect real property within the taxing state.

Excludes from this Act's prohibition against state taxation: (1) entities incorporated or formed under the laws of such state; (2) individuals domiciled in such state; and (3) the owner or beneficiary of a partnership, S corporation, limited liability company, or similar entity that has a physical presence in the taxing state.