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HOW MUCH SHOULD YOU BE IN A STATE BEFORE IT CAN TAX YOU?

June 26, 2008

State taxes are a big headache for a small business. The states are all over the place in determining when you cross the line to have "nexus" making you subject to tax. Once they decide you're in, some states aren't above highway robbery as collection tool.

This week the a House of Representatives Committee has been holding hearings on H.R. 5267, the Business Activity Tax Simplification Act of 2008 (BATSA):

BATSA would establish that businesses could only be subject to tax burdens in states where they have property and employees for at least 15 days in a year. This "physical presence" standard was reaffirmed most recently in the 1992 Supreme Court case Quill Corp. v. North Dakota, which remains binding precedent. Many states, however, are pushing for "economic presence" standards, which tax businesses based on where customers are located.

The BATSA standard would save the little guy a world of hassle, cost and uncertainty. It certainly would have helped Al Franken. Naturally state governments think its a bad thing, and they have the imaginary numbers to prove it. The National Governors Association also testified against the bill. And what's more important anyway - your crummy little livelihood, or the budgeting convenience of your governor?

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