MTC Uniformity Committee Discusses Past Work, Upcoming Projects

At the Multistate Tax Commission’s (MTC) fall meetings the uniformity committee discussed:

• the history of the committees work;
• continued interest in the MTC’s revision to its position on P.L. 86-272;
• partnership developments; and
• the different versions of mobile workforce legislation.

P.L. 86-272 Revision

At the August meeting, the MTC adopted revisions to its Statement Concerning Practices of the Multistate Tax Commission and Supporting States Under Public Law 86-272. The revisions address activities conducted via the internet.

The revised statement makes clear that activities conducted over the internet are shielded from taxation in the customer’s state if the business is only soliciting orders for sales of property. The order must be sent outside the state for processing.

However, when a business interacts with a customer on a website or app, the business engages in a business activity in a customer’s state. Static text or photos on a website are not business activity themselves.

The revised text then supplies eleven examples of activities and if they are taxable business activity. Since approving the proposal, the MTC continues to see interest in the revised statement.

Partnership Developments

The committee discussed general partnership developments and its new partnership project. Among ongoing state partnership developments is the adoption of elective passthrough entity taxes.

Partnership Project

The committee has begun working on a partnership project. The goal of the work group is to consider:

• sourcing of partnership income and items for state tax purposes;
• sourcing of gains and losses from the sale of partnership interests;
• entity level taxation issues; and
• ·other administrative and enforcement issues including reporting and withholding.

The project may produce a model, uniform law, or find best practices that exist in the states. The group has begun discussing some of the bigger issues regarding taxation of partnerships.

Mobile Workforce Legislation

Currently there are three legislative proposals to deal with mobile employees. The MTC provided an analysis looking at:

• MTC Model Mobile Workforce Statute;
• Council On State Taxation (COST) Draft; and
• Remote and Mobile Worker Relief Act of 2021.

The MTC proposal, developed in response to the original federal mobile workforce legislation, was formally adopted by the MTC for recommendation to the states in 2011. North Dakota has adopted the MTC approach.

COST is now focusing on passing mobile workforce laws at the state level and has drafted separate legislation for that purpose.

Finally, versions of the federal legislation have been proposed over the last two decades. If adopted, it would preempt state law. While the legislation is routinely introduced in Congress, the bill has not been moved forward.