Business Activity Taxation by States Increases
If you operate like an increasing number of U.S. small businesses today, chances are your business does some activities over state lines — thanks to the Internet and cheap communications and shipping.
A long line of cases and law has protected interstate commerce and prohibits states from taking action to place an undue burden on companies trying to do business across state lines. However, in recent years, some states have gotten more aggressive in trying to find ways to impose taxes on small businesses.
The U.S. House Committee on Small Business under Chairwoman Nydia Velazquez (NY) has been considering the effect of business activity taxes across state lines and their effect on small businesses. For instance, this testimony given by small business representatives is eye-opening.
The Committee’s press release notes:
U.S. small businesses regularly sell their products and services around the globe, but can they reach out as freely to consumers within our own nation? According to witnesses at a hearing of the House Committee on Small Business, the answer is “no.” Many entrepreneurs are finding that Business Activity Taxes (BAT), which vary considerably from one state to the next, significantly inhibit their ability to engage in commerce. The congressional panel, chaired by Congresswoman Nydia M. Velazquez, today explored the issue with an eye towards balancing the needs of entrepreneurs with the fiscal interests of states.
“We are seeing cases where entrepreneurs are charged a $400 BAT for less than $100 of total sales in a state. Not only does that have a chilling effect on small firms, it hurts the national economy,” said Chairwoman Velazquez.
This state taxation issue is definitely one to be aware of. And you might want to double check with your own tax people.
