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10 Joseph Henchman, Testimony before the U.S. House Subcommittee on Commercial and Administrative Law, Committee on the Judiciary: A Uniform Physical Presence 1 (2010)

handle is hein.taxfoundation/taxfaadd0001 and id is 1 raw text is: A Uniform Physical Presence Standard Would Limit Destructive State Efforts to Export Tax Burdens By Joseph Henchman Tax Counsel, Tax Foundation Hearing on H.R. 1083, the Business Activity Tax Simplification Act Before the Subcommittee on Commercial & Administrative Law, Committee on the Judiciary, U.S. House of Representatives February 4, 2010 Mr. Chairman, Ranking Member Franks, and members of the Committee: With online retail transactions accounting for a significant and growing share of total sales, the importance of preserving the free flow of interstate commerce grows as well. It is not new for states to seek revenues by shifting tax burdens away from the majority of voting residents, such as with changing nexus rules. Because economic integration is greater now than it has ever been before, the economic costs of nexus uncertainty are also greater today and can ripple through the economy much more quickly. For example, if a New York company sells a product on its website to a California purchaser via servers in Ohio and Colorado, is the transaction everywhere, nowhere, or always somewhere at a given point in time? A physical presence rule provides a logical answer to where the transaction is located, identical to the answer given for brick-and-mortar businesses: in this case, New York, where the company's property and payroll are located. Proponents of economic nexus are mostly unanimous in rejecting that choice, but they would substitute only uncertainty about the ultimate answer. Inflicting this uncertainty on our economy, as states have begun doing in absence of a uniform physical presence standard, has been disastrous.' As long as state tax systems are defined by geographical lines, consistency requires that taxes be imposed only on individuals and businesses within those geographical lines. States are limited in their powers and this includes geographic limits to the power of taxation.

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