Congress Urged to Pass Internet Taxation Bill

WASHINGTON — A federal bill that has reached a House subcommittee would establish a clear definition of when states can levy income taxes, franchise taxes and business activity taxes on companies that have no physical presence in state, according to a new study.

H.R. 1956's general physical presence rule, being debated today at a House Judiciary Commerce and Administrative Law Subcommittee hearing, is another attempt to impose taxation for companies that sell goods and services over the Internet, including online adult products.

The study by the Tax Foundation, “Paying for 'Civilized Society' in the Global Marketplace,” supports H.R. 1956, which has heavy opposition.

"A physical presence standard for business activity taxes is simple, fair, and will reduce the burden of tax compliance for U.S. companies that sell all over the United States and the world," said Foundation staff attorney Chris Atkins, author of the study.

The alternative to physical presence is economic presence, according to which corporations must pay tax anywhere they make a sale or derive income, Atkins said. This opens firms up to the complexity of complying with dozens of state tax systems, impairing interstate commerce and economic growth.

Both the Multistate Tax Commission and the Federation of Tax Administrators have come out against H.R. 1956.

The MTC called the legislation "an unwarranted preemption of the states' authority to levy taxes on the business activities of multistate enterprises," while the FTA said, "Defining nexus in federal law would upset the tenets of federalism and the system of shared authority and responsibilities long practiced by the federal and state governments."

Meanwhile, the Kansas Department of Revenue recently decided that online retail businesses must charge customers state and local sales tax in accordance with the state's destination-based sourcing rules.

The Revenue Department’s opinion letter said that destination-based sourcing rules require Kansas retailers to collect state and local sales tax based on the buyer's Kansas ship-to address, unless the buyer takes delivery at the seller's address.

The agency, in its opinion, explained that Kansas provides taxpayers with a database that coordinates different local rates for determining sales tax. The department provided directions on how to incorporate this database into a taxpayer's billing program.

Copyright © 2025 Adnet Media. All Rights Reserved. XBIZ is a trademark of Adnet Media.
Reproduction in whole or in part in any form or medium without express written permission is prohibited.

More News

Age Verification Watch: Patching the Holes

This roundup provides an update on the latest news and developments on the age verification front as it impacts the adult industry.

Ofcom Fines OnlyFans Parent Company Over Inaccurate Age Verification Reporting

U.K. communications regulator Ofcom has fined OnlyFans parent company Fenix International Ltd. $1.36 million for inaccurate reporting of its age verification measures.

Irish Government Releases Report on Sex Work Decriminalization Legislation

The Irish government has released a report reviewing a 2017 law that decriminalized sex work across the country.

Texas Bill Would Require Age Verification for Online Sex Toy Sales

A new bill in the Texas state legislature would require online retailers to implement age verification of purchasers before selling “obscene devices” to anyone in that state.

Age Verification Watch: Michigan Joins the AV Club, Some Laws Just Make No Sense

This roundup provides an update on the latest news and developments on the age verification front as it impacts the adult industry.

Free Speech Groups Back SCOTUS Appeal of Georgia Strip Club Tax

Two civil liberties organizations filed an amicus brief Tuesday supporting a petition asking the U.S. Supreme Court to hear an appeal in a case involving whether a tax specifically aimed at adult entertainment establishments violates the First Amendment.

Swedish Court Rules LELO Products Do Not Infringe 'Invalid' Satisfyer Patent

A Swedish district court has ruled that a patent filed by Satisfyer parent company EIS GmbH is not valid, and therefore three products from pleasure brand LELO are not in violation.

North Dakota House Committee Questions Anti-Porn 'Public Health Hazard' Claim

The North Dakota House of Representatives Education Committee on Monday amended a resolution that would have recognized pornography as a “public health hazard,” instead replacing that language with a call for further study into whether such a designation is appropriate.

Wyoming Governor Signs Age Verification Law

Wyoming Governor Mark Gordon signed the state's new age verification bill into law yesterday.

Florida Bill Would Auto-Filter Porn for All Users, Not Just Minors

Florida lawmakers have introduced legislation to require manufacturers to equip tablets and smartphones with a filter that would prevent all users from accessing material deemed harmful to minors, to be automatically enabled on devices activated in that state.

Show More