According to the In the Loop: On K Street column in today’s Washington Post, American Express, Microsoft, General Electric, J.P. Morgan Chase, Johnson & Johnson and Disney are pressing Congress to limit states’ ability to tax companies like themselves.
These corporate giants, along
The Coalition argues that companies must have a physical presence in a state in order for the state to tax them. States disagree.
Currently, reports the Post, 16 states claim the right to tax a company even if it has nothing more than a Web site on someone else’s server in the state. Eleven states say a company can be taxed if it has a listing in a local phone book. And 10 states say that merely registering to do business in their states is enough to be taxed.
"This is completely wrong," Jeffrey Levey, tax lobbyist for Coalition member Citigroup, told the Post. "States should not be able to tax a company unless it has an actual physical presence there."
Legislation on behalf of the companies has been introduced in both the Senate and the House. However, earlier legislative attempts, according to the newspaper, have failed. So have courtroom efforts. The Supreme Court has twice refused to hear such cases.
What the states say: Plus, the National Governors Associations has its own powerful lobbying arm, which, says the column, has spent years successfully beating back corporate efforts to prevent states from taxing companies wherever they have customers, regardless of where the firms have stores.
If the states lose the ability to tax the activities of nonresident businesses, state treasuries would lose $6 billion a year.
And, say the states, the corporations’ view is not only self-serving, but outdated.
"The standard out there now is economic presence, not physical presence," according to David C. Quam, the NGA’s chief lobbyist. That, argue state officials, better reflects the realities of Internet age. What the companies want, Quam told the Post, "is to go back to the 1950s model of the United States, when businesses had had to be physically present if they were going to be taxed."
I understand, and am sympathetic to, the states’ point of view, especially in light of today’s economic concerns at all levels of government.
And I know that if a state can’t get tax money from one source, say businesses, it will get the money elsewhere, probably from its individual residents in some other form or fashion.
But such long state tax arms strike me, on a visceral if not intellectual level, as over-reaching.
