Tax Lawyer's Blog

Republican Senator Jim Bunning of Kentucky introduced a bill in the Senate on October 1, 2008 that would require that a taxpayer have a “physical presence” in a state before that state could impose a tax on the individual’s E-commerce.

Senator Jim Bunning

The bill lists three indicia of physical presence:

1.  The taxpayer has assigned an employee to the state;
2.  The taxpayer used the services of an agent to establish or maintain the e-commerce in the state (if the agent does not perform the same services for anyone else); or
3.  The taxpayer leases or owns real property or tangible personal property, other than computer software, in the state.

A physical presence would not include the following:

1.  Entrance into an agreement to share revenue generated by an electronic commerce presence owned or maintained by someone physically present in a state;
2.  Presence in the state for less than 15 days; and
3.  Presence in the state merely to conduct limited or transient business activity.

Here is the full text of S. 3670.

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