Simplifying Business Activity Taxes
If you are a small business owner who only does business within the state where your business resides, you may not even know what Business Activity Taxes (BAT) are. But if you do business outside your state, you are painfully aware of them. A Business Activity Tax is levied by states on out of state businesses to recoup the lost tax revenue they feel they are owed because of that business’s activity in their state.
Good news may be on the horizon. According to a Wall Street Journal report…
“The House Committee on Small Business yesterday explored the toll that business-activity taxes – known as “BAT” – take on small businesses that do business in states other than their own….Increasingly, the committee noted, states are increasing these taxes and collecting them more aggressively. The taxes can run high even when sales seem relatively low. “We are seeing cases where entrepreneurs are charged a $400 BAT for less than $100 of total sales in a state,” said Committee Chairwoman Nydia Velazquez [D-N.Y.], in a news release. One example the committee points to: A South Carolina software company with $100,000 in annual sales that was required by the state of New Jersey to pay $500 in annual corporate tax, plus a $100 filing fee, because its software was used in the state. (And that included some years in which annual revenues from New Jersey residents were as low as $49.)”
In order to relieve the burden BATs place on business owners, the House Committee on Small Business has introduced a bill designed to make the taxes more palatable for businesses, including creating a federal standard for levying them, so they are at least more predictable. The bill is called the Business Activity Tax Simplification Act of 2008 Small business owners should begin writing their congress people and make clear their support for this bill. The difference could be multiple thousands of dollars per year, depending on how often you do business out of state.
You may be saying, “Noe of this applies to me, because I only do business within my own state.” That’s where you are now–but other business owners just like you depend on inter-state business for their livelihood. Besides, as your business grows and expands, you may be doing inter-state business yourself one day. So, whether it directly effects your business right now or not, get on the phone and tell your congress people to support the Business Activity Tax Simplification Act of 2008.
“The Consumer Electronics Association (CEA)(R) applauds the introduction of the Business Activity Tax Simplification Act (BATSA) by Representatives Rick Boucher (D-VA) and Bob Goodlatte (R-VA)….The Consumer Electronics Association (CEA) is the preeminent trade association promoting growth in the $161 billion U.S. consumer electronics industry. More than 2,200 companies enjoy the benefits of CEA membership, including legislative advocacy, market research, technical training and education, industry promotion and the fostering of business and strategic relationships. CEA also sponsors and manages the International CES – Where Entertainment, Technology and Business Converge. All profits from CES are reinvested into CEA’s industry services.”
Michael Petricone, senior vice president, Government Affairs, CEA said,
“No taxation without representation is a basic American principle. Congress has a constitutional responsibility to ensure that interstate commerce is not harmed by unfair or burdensome taxation. This developing patchwork of state levies on non-resident firms creates a chilling effect that inhibits commerce and innovation. The burden falls heaviest on small businesses that do not have the resources to contest these ill-founded taxes.”
The bill is currently in the House Judiciary Committee. It must clear that committee before being brought to the house floor for a vote. So, it is imperative to let your voice be heard.
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