A day after commemorating Tax Freedom Day, the Tax Foundation’s Joseph Henchman heads to Capitol Hill this afternoon to testify in connection with a bill targeting “aggressive” state tax practices.
Here are some highlights from Henchman’s upcoming testimony on the Business Activity Tax Simplification Act:
About half the states now assert "economic nexus" in corporate taxation, claiming the power to tax corporations with no property or employees in the state. Six states have adopted aggressive sales tax stands, including Arkansas earlier this month.
These trends result from states' incentive to shift tax burdens from physically present individuals and businesses to those who are beyond their borders. Recent examples have included door-to-door salesmen, credit card companies, franchised fast food operations, cell phone providers, online travel companies, car rental companies, and affiliate- and franchise-based operations.
Businesses must consequently deal with:
Complex tax statutes
Uncertainty about what activities create tax obligations in different states
Lack of uniformity between different states in tax rules and formulas
Generally, wasting significant time, wealth, and brainpower navigating tax compliance rather than doing more productive things.