The House Committee on the Judiciary approved three bills on June 17 that would limit state and local taxing authority.  The committee advanced the following three bills: the Mobile Workforce State Income Tax Simplification Act (H.R. 2315); the Digital Goods and Services Tax Fairness Act (DGSTFA) (H.R. 1643); and the Business Activity Tax Simplification Act (BATSA) (H.R. 2584). NACo opposes both DGSTFA and BATSA because they preempt state and local tax authority, and would hamper counties’ ability to provide critical services like transportation, infrastructure investment and justice and public safety.

The Mobile Workforce State Income Tax Simplification Act would limit states’ ability to collect income tax for employees who do not have a permanent residence in that state and who perform employment duties in that state for fewer than thirty days in a calendar year.

DGSTFA would significantly reduce state and local revenues by preempting the taxation of purchases such as downloaded music, movies and online services. Counties are primarily concerned with the definition of digital service in the bill, as it would potentially exclude revenues generated from on-demand and pay-per-view services derived from local cable franchise fees. As the popularity of these services increase, local governments stand to lose millions of dollars that are allocated for various purposes like community centers and library facilities.

BATSA would represent an unwarranted federal intrusion into state and local tax authority by mandating the use of a physical presence standard for determining whether a state can tax a company for doing business within its borders. Essentially, the law would require that businesses could only be subject to taxes in states where they have property and employees for at least fifteen days in a year. This would be contrary to current practice where presence is generally defined in the first instance by state law. The various state tax laws have already established the types of activities conducted by a business within its borders that would create presence with the state. BATSA seeks to invalidate those state laws by establishing a physical presence standard. Altering current state business tax laws would impact state revenue and ultimately the funding assistance transferred to local governments.

During the markup, Ranking Member John Conyers (D-Mich.) submitted a letter for the record from NACo and other local government groups opposing the measures.