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.
If enacted, HB 427 would significantly impact state tax laws by limiting the ability of states to impose taxes on businesses engaged in interstate commerce under the defined parameters of solicitation. This could prevent states from overreaching in their tax policies that affect out-of-state businesses, thus promoting a more favorable environment for commerce. Proponents of the bill argue that it is necessary to ensure that businesses can operate without the risk of conflicting tax obligations from different states, which can deter business activities and economic growth.
House Bill 427, known as the Interstate Commerce Simplification Act of 2025, seeks to amend Public Law 86–272 by expanding the prohibition of state taxation related to certain solicitation of orders. The primary aim of this bill is to clarify and broaden the definition of 'solicitation of orders' to include any business activity that facilitates solicitation, regardless of whether it serves an independently valuable function. By doing this, the bill aims to simplify the taxation structure for interstate businesses, potentially making compliance easier and less burdensome for companies operating across state lines.
While supporters of HB 427 argue for the simplification and standardization of tax obligations to benefit businesses, critics may raise concerns regarding the potential erosion of state tax revenues. There are apprehensions that the expanded definition might lead to loopholes that businesses could exploit to avoid paying state taxes altogether. Furthermore, local governments may contend that this could undermine their authority and autonomy in regulating commerce within their jurisdictions, ultimately affecting public services funded by state revenue.