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Franchises seek greater certainty on state business activity tax law: passage of BATSA would greatly reduce the financial and administrative burden associated with tax compliance for franchise businesses.

Congress should pass legislation that brings greater certainty to franchise small businesses seeking to comply with state tax laws, according to testimony delivered to Congress on April 13 by Outdoor Living Brands Vice President and CFO Corey Schroeder on behalf of the International Franchise Association.

Schroeder spoke of the difficulty his company faces navigating the unpredictable nature of state tax nexus decisions across multiple jurisdictions when he addressed the House Subcommittee on Courts, Commercial and Administrative Law during a hearing to discuss the Business Activity Tax Simplification Act, or BATSA. He added that those decisions affect the nearly 825,000 franchise small businesses that collectively account for nearly 18 million jobs in the United States.

"Franchising is a unique method of doing business," said Schroeder. "This legislation will ensure that state tax officials can no longer impose tax liability on businesses that have no physical presence in their state. Passage of BATSA would greatly reduce the financial and administrative burden associated with tax compliance for my business."

In the case of Outdoor Living Brands, the company is incorporated in the Commonwealth of Virginia, and its physical presence, the development of its brand, the development and training of new franchisees, the support of existing franchisees, everything that makes it a franchisor, takes place in Virginia. The only assets Outdoor Living Brands, and most franchisors, have in other states are their franchise agreements--the contract that governs the terms of the relationship between a franchisor and its franchisees.

IFA recently outlined its "Solutions for the Economy," the franchise business community's public policy goals that encourage economic recovery and job growth to Congress. While franchising is projected to grow at a rate of more than 2.5 percent in 2011 and create more than 194,000 new jobs, without economic certainty and pro-growth policies from Washington such as the BATSA, franchise businesses will struggle to achieve their full growth potential.

"Long-term certainty on tax policy is critical in order for franchise small businesses to thrive," said IFA President and CEO Steve Caldeira, CFE. "Congress needs to pass progrowth tax policies such as BATSA, a permanent extension of the current tax rates and a permanent solution for the estate tax, in order to bring much-needed certainty to franchise small businesses struggling to grow and create jobs at their full, pre-recession levels."

The BATSA would codify the traditional physical presence standard for franchise businesses operating across multiple states and relieve small businesses from unnecessary audits and tax bills in jurisdictions where they have no tangible property or staff. While most franchise companies have franchise locations in many states, in a large majority of instances it is local entrepreneurs that own and operate franchise businesses. These businesses provide jobs, services and economic activity for local communities across the country.

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Title Annotation:GOVERNMENT RELATIONS & PUBLIC POLICY
Comment:Franchises seek greater certainty on state business activity tax law: passage of BATSA would greatly reduce the financial and administrative burden associated with tax compliance for franchise businesses.(GOVERNMENT RELATIONS & PUBLIC POLICY)
Publication:Franchising World
Date:Jun 1, 2011
Words:464
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