The Business Activity Tax Simplification Act of 2026 seeks to clarify and regulate state taxation of businesses engaged in interstate commerce. It significantly updates Public Law 86-272, which previously limited state net income taxation based on solicitation of tangible personal property. The bill expands these protections to include sales and transactions of digital goods, digital services, and other forms of property and services, while also clarifying activities that do not create a taxable presence. Furthermore, the Act extends the prohibitions of Public Law 86-272 to encompass "other business activity taxes," not just net income taxes, for taxable periods beginning on or after January 1, 2019, and establishes a clear minimum jurisdictional standard requiring a physical presence in a state for that state to impose such taxes. This physical presence is defined by activities such as having individuals or employees in the state, using an exclusive agent, or owning/leasing property, with a de minimis exception for short-term or transient activities. The bill also outlines specific exceptions to the physical presence rule, including for entities incorporated or individuals domiciled within the taxing state, and preserves state authority regarding illegal activities or combined reporting. Finally, it provides rules for computing tax liabilities for affiliated persons in group returns, ensuring proper apportionment based on factors attributable to entities with a taxable presence in the state.