Businesses that sell across state lines rely on Public Law 86-272 to figure out whether a state can tax their income. But that law is old. It was written in 1959, long before cloud computing, SaaS, digital products, or e-commerce existed. <\/p>\n\n\n\n
A new federal bill wants to fix that gap. It’s called the Business Activity Tax Simplification Act, or BATSA, and Rep. Harrigan introduced it in the current Congress. The bill would expand PL 86-272 and set one clear physical presence standard for state business activity taxes. It hasn’t passed yet. But if it does, it could reshape how multistate businesses think about state income tax altogether. <\/p>\n\n\n\n
Why Now?<\/strong> <\/p>\n\n\n\n Public Law 86-272 protects businesses in a narrow way. A state can’t tax an out-of-state company if that company’s only in-state activity is soliciting orders for tangible goods. Those orders must be approved and shipped from outside the state. <\/p>\n\n\n\n That rule made sense in 1959. It doesn’t fit today’s economy, where companies make money from digital products, cloud services, and remote software access that the old law never saw coming. <\/p>\n\n\n\n States have noticed the gap too, and some have gotten aggressive about it. They argue that things like website cookies or customer portals go beyond what PL 86-272 protects. That creates nexus where none existed before. BATSA tries to draw clearer lines around all of this. <\/p>\n\n\n\n It covers digital business, not just physical goods. Right now, PL 86-272 only protects tangible personal property. BATSA would expand that to digital goods, digital services, software delivered electronically, cloud computing, and data processing. For SaaS companies, this is the huge change and would give them much clearer footing of where they owe income tax. <\/p>\n\n\n\n It sets one physical presence standard for every state. Under the bill, a state generally can’t tax a company’s income unless that company is physically present there. The bill spells out what counts: <\/p>\n\n\n There’s also a short-stay exception. Spend fewer than 15 days in a state during the tax year, and it generally won’t count as presence. <\/p>\n\n\n\n BATSA is still just a proposal. But it shows Congress is paying attention. If the bill passes, here’s what businesses should follow:<\/p>\n\n\nWhat the Bill Would Actually Do <\/h2>\n\n\n\n
\n u003cliu003eEmployees\u00a0located\u00a0in the state\u00a0u003c\/liu003eu003cliu003eAgents used to build or\u00a0maintain\u00a0a market in the\u00a0state.\u00a0u003c\/liu003eu003cliu003eOwned or leased property\u00a0(tangible or real)\u00a0in the\u00a0state.\u00a0u003c\/liu003e <\/ul>\n <\/div>\n <\/div>\n <\/div>\n<\/div><\/section>\n\n\n
Why This Matters for Multistate Businesses <\/h2>\n\n\n\n