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Web Tax Guidelines Bill for States Re-Introduced in House

Virginia Representatives Rick Boucher (D) and Bob Goodlatte (R) have reintroduced a bill that would raise the bar for states that want to tax Web sites.

The goal of the bill, The Business Activity Tax Simplification Act, is to "clarify the confusion surrounding when states can levy business activity taxes on out-of-state businesses," the legislators said. Specifically it will provide guidelines for when an out-of-state business can be taxed for doing business in a state.

"Just because a website can be accessed by consumers in a certain state," said Goodlatte in announcing the bill "doesn't mean that state should be able to collect taxes from the Web site owner." The legislators argue that the patchwork of state standards has discouraged businesses from expanding.

One of the state tax impositions they are targeting in the bill is when a state holds that having a Web site residing on a server in a particular state creates a sufficient connection to the state to justify taxing it.

"This standard ensures that states have the ability to tax businesses that benefit from services provided by the state," said Boucher, "while businesses that have no physical presence in a state would be exempt from taxation on business activity in that state," said Boucher, who is co-founder and co-chair of the House Internet Caucus, as well as chairing the House Communications, Technology & Internet Subcommittee.