Proposal to Restore Physical Presence Test for State Taxes

A state may impose its income and sales taxes on businesses if there’s a “nexus” (a commercial connection to the state). In 2018, the U.S. Supreme Court essentially axed the physical presence requirement for sales tax, allowing states to impose the tax on remote sellers (with exemptions for “small sellers”). Now, a proposal in Congress—Business Activity Tax Simplification Act (BATSA) (H.R. 9244) would restore a physical presence for determining nexus. More specifically, a business would have to be physically present in a state for 15 or more days to be subject to its income or sales tax. A Tax Foundation report supports the view that physical presence should be required to establish nexus. Who knows how Congress will proceed on this issue. #IdeaoftheDay

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