The bill's amendments are expected to significantly impact state laws governing taxation, specifically by limiting states' ability to impose taxes on businesses engaged in solicitation activities across state lines. This could lead to a reduction in state revenues, particularly for those that rely on taxation of businesses as a major source of income. Supporters of SB5158 argue that this will foster a more favorable environment for business growth and interstate commerce, while critics may express concerns regarding the implications on state funding.
Summary
SB5158, also known as the Interstate Commerce Simplification Act of 2024, proposes to amend Public Law 86–272. The primary aim of the bill is to expand the prohibition against state taxation related to specific solicitation of orders. By refining the definition of what constitutes 'solicitation of orders,' the bill intends to provide clarity and potentially broaden the scope of activities that are protected from state taxation, thereby enhancing the ease of interstate business operations.
Contention
Notably, the bill has generated discussions that highlight potential conflicts between state rights and federal regulation over commerce. Opponents argue that expanding such tax protections could lead to a 'race to the bottom' among states, incentivizing them to reduce tax obligations to attract businesses. This dispute raises questions about the balance between maintaining fair competition among states and preserving adequate funding for public services, as state revenues might be adversely affected by such legislative changes.
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.