Business Activity Tax Simplification Act

A bipartisan group of lawmakers are pressing for the passage of the Business Activity Tax Simplification Act (“BATSA”). The federal legislation would prohibit states and localities from levying certain taxes, including franchise taxes, on businesses that do not keep employees or property in that jurisdiction for more than two weeks during the year.

In a recent op-ed in support of the legislation (available here), Reps. Goodlatte and Scott noted that a growing number of state and local governments have adopted standards to tax out-of-state businesses that may conflict with the Supreme Court’s interpretations of the Commerce Clause. The aim of BATSA is to impose uniformity among jurisdictions in the imposition of business-activity taxes. BATSA has garnered support from various business organizations, including the International Franchise Association.

Proposed Legislation in Georgia: Franchisees Are Not Employees

Legislation currently working its way through the Georgia General Assembly provides that franchisees may not be considered employees for purposes of Georgia’s workers’ compensation laws. House Bill 548, sponsored by Rep. Chuck Martin, amends the definition of “employee” in Georgia’s workers’ compensation statute by clarifying that “[i]ndividuals who are parties to a franchise agreement as set out by the Federal Trade Commission franchise disclosure rule…shall not be deemed employees for purposes of this chapter.”

The bill was likely introduced in response, at least in part, to the Massachusetts Supreme Court’s controversial decision in Coverall N. Am., Inc. v. Commissioner of the Div. of Unemployment Assistance, 447 Mass. 852 (2006). There, the court held that an individual franchisee was an employee of its franchisor and was thus entitled to unemployment insurance when the franchisee’s business failed. As industry pressure mounts, we expect similar legislation to be introduced in a number of states.