Resolution on State and Local Business Activity Taxes Exposed

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The Resolution on State and Local Business Activity Taxes was adopted by ALEC's Tax and Fiscal Policy Task Force at the Annual Meeting on August 1, 2003, approved by the full Board of Directors August, 2003. According to ALEC.org, the Resolution was re-approved by the Board of Directors on January 29, 2013. (Accessed on 1/27/2016).

ALEC Resolution Text

WHEREAS, the United States Supreme Court, in Quill Corp. v. North Dakota, 504 U.S. 298 (1992), held that remote sellers lacking a physical presence may not be required to act as tax collection agents of the state; and

WHEREAS, direct state and local taxes on business, also known as “business activity taxes,” such as income, franchise, net worth, business license, business and occupation, single business, capital stock, and like taxes, impose an even greater burden on businesses engaged in interstate commerce than an obligation to collect a tax from consumers; and

WHEREAS, the physical presence standard promotes fairness by ensuring that businesses that receive benefits and protections provided by state and local governments pay their fair share for these services; and

WHEREAS, the ability of state and local jurisdictions to tax out-of-state businesses should be limited to those situations in which the business has employees and/or property in the taxing jurisdiction and accordingly receives meaningful governmental benefits or protections from the jurisdiction; and

WHEREAS, the physical presence standard results in the proper attribution of business profits to taxing jurisdictions where a business is located and thus does not result in tax avoidance; and

WHEREAS, a business activity tax filing requirement based on a standard other than physical presence results in increased filing requirements and thus increased compliance costs; and

WHEREAS, businesses currently rely on a physical presence standard for complying with state and local business activity tax obligations, and this standard is applied currently by most state courts; and

WHEREAS, any Congressional authorization for states to impose a sales and use tax collection obligation would further put businesses at risk of the unfair application of business activity taxes by jurisdictions in which the businesses lack a physical presence; and

WHEREAS, the imposition of a standard other than physical presence for business activity taxes would expose U.S. companies lacking a physical presence overseas to similarly expansive and unfair taxation by foreign countries and their provinces; and

WHEREAS, businesses operating in interstate commerce should not be compelled to pay taxes in state and local jurisdictions solely as a result of the business having customers located in the taxing jurisdiction; and

WHEREAS, the United States economy has become more global since Congress first enacted Public Law 86-272 and has shifted toward the provision of more interstate enacted Public Law 86-272 and has shifted toward the provision of more interstate services and intangibles, and providers of services and intangibles are competitively disadvantaged relative to businesses that only sell tangible personal property;

WHEREAS, the enactment of new business activity taxes other than income taxes threatens to circumvent the intent of Congress in enacting Public Law 86-272;

NOW, THEREFORE BE IT RESOLVED, That the state of ______ urges Congress to enact legislation 1) recognizing a physical presence standard for the imposition of state and local business activity taxes, 2) defining de minimis standards for measuring physical presence and setting reasonable limits on the attribution of nexus, and 3) updating Public Law 86-272 to extend the current protections available for the solicitation for sales of goods to the solicitation for sales of services and intangibles and to apply these protections to all business activity taxes; and

BE IT FURTHER RESOLVED, That the state of ______ recognizes that any Congressional approval of “sales tax streamlining” without the simultaneous enactment of these business activity tax measures would have a harmful effect on American businesses and the economy.


Adopted by the Tax and Fiscal Policy Task Force at the Annual Meeting, August 1, 2003.

Approved by the full ALEC Board of Directors August, 2003.