Out-of-state business taxes

John Dimsdale Jul 26, 2006


SCOTT JAGOW: Let’s say you own a business in Maryland, but you have some customers in Pennsylvania. Right now, Pennsylvania can charge your business state income tax even though your shop is in Maryland. The House is looking at a bill that would put on a lid on this practice.Lawmakers were supposed to vote on the bill yesterday, but they want to look into this a little more. John Dimsdale reports from Washington.

JOHN DIMSDALE: As companies use technology to sell their wares across state borders, state governments have been slapping income taxes on businesses that have neither stores nor employees in their state.

Maureen Riehl with the National Retail Federation says overlapping state laws sometimes hit companies with double taxation.

MAUREEN RIEHL: We think states are overreaching. For income tax purposes it’s long been tax policy that the income has to be as a result of having a physical presence. What this bill does is actually set out in detail what physical presence means

The National Governors’ Association’s David Quam figures the bill pending in the House will cost states $6 billion a year in lost revenue.

DAVID QUAM: Because we’re talking about state tax dollars, these decisions should be made back in state capitals, not in Washington, D.C.

Even if the House approves the state tax limitations, Senate passage before year’s end is more doubtful.

In Washington, I’m John Dimsdale for Marketplace.

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