If passed, HB8021 would significantly influence how state laws interact with interstate business activities, particularly concerning taxation. By clarifying the parameters around what constitutes solicitation of orders, this bill seeks to prevent states from imposing taxation on businesses based solely on their solicitation efforts in other states. As states vie for economic growth, such legislation is expected to encourage businesses to operate more freely and with greater confidence across state lines, potentially leading to increased economic activity and competition.
Summary
House Bill 8021, known as the Interstate Commerce Simplification Act of 2024, proposes to amend Public Law 86-272. The bill aims to broaden the prohibition of state taxation associated with certain solicitation of orders. The authors of the bill believe that expanding the definition of 'solicitation of orders' to include various business activities that facilitate order requests will enhance the ability of businesses to operate across state lines without tax-related barriers. This initiative is seen as crucial to maintaining a level playing field for businesses engaged in interstate commerce.
Contention
Despite its economic intentions, the bill has not been without controversy. Critics argue that broadening the definition may undermine state tax revenues, which are heavily reliant on taxing businesses operating within their jurisdictions. Concerns also arise about the potential loss of local control over businesses and economic responsibilities. The discussions surrounding HB8021 reflect a tension between the desire for a streamlined interstate business environment and the need for states to retain authority over their economic principles and taxation policies.
Interstate Commerce Simplification Act of 2025This bill expands the definition of solicitation of orders to include business activities that serve an independently valuable business function apart from the solicitation of orders for purposes of the limitation on a state’s authority to impose a net income tax on an out-of-state seller.Under current law, a state is prohibited from imposing a net income tax on income derived from within the state from interstate commerce if the only business activity within the state is the solicitation of orders for the sale of tangible personal property, provided that the orders are approved (or rejected) and filled by shipment or delivery from outside of the state. Further, the Supreme Court has held that the term solicitation of orders includes (1) activities that are strictly essential to making requests for purchases, and (2) ancillary activities that serve no independent business function apart from their connection to requests for purchases.Under the bill, the definition of solicitation of orders is expanded to include business activities that facilitate the solicitation of orders even if such business activities serve an independently valuable business function apart from the solicitation.