12 CSR 10-2.180 - Public Law 86-272 Immunity
(1) Nature
of Property Being Sold. Only the sale of tangible personal property is afforded
immunity under P.L. 86-272; therefore, the leasing, renting, licensing or other
disposition of tangible personal property, intangibles or any other type of
property is not immune from taxation by reason of P.L. 86-272. The definition
of tangible personal property for this purpose is that to be found under each
state's respective laws.
(2)
Solicitation of Orders.
(A) For the instate
activity to be immune, it must be limited solely to solicitation (except for
de minimis activities conducted by independent contractors
described in section (3)). Solicitation means-1) speech or conduct that
explicitly or implicitly invites an order; and 2) activities that neither
explicitly or implicitly invite an order, but are entirely ancillary to
requests for an order.
(B)
Ancillary activities are those activities that serve no independent business
function for the seller apart from their connection to the solicitation of
orders. Activities that a seller would engage in apart from soliciting orders
shall not be considered as ancillary to the solicitation of orders. The mere
assignment of activities to sales personnel does not, merely by this
assignment, make the activities ancillary to solicitation of orders.
Additionally, activities that seek to promote sales are not ancillary, because
P.L. 86-272 does not protect activity that facilitates sales, it only protects
ancillary activities that facilitate the request for an order. The conduct of
activities not falling within the foregoing definition of solicitation will
cause the company to lose the exemption from a net income tax afforded by P.L.
86-272, unless the disqualifying activities, taken together, are de
minimis.
(C)
de
minimis activities are those that, when taken together, establish only
a trivial additional connection with the taxing state. An activity regularly
conducted within a taxing state pursuant to a company policy or on a continuous
basis shall normally not be considered trivial. Whether or not an activity
consists of a trivial or non-trivial additional connection with the state is to
be measured on both a qualitative and quantitative basis. If this activity
either qualitatively or quantitatively creates a non-trivial connection with
the taxing state, then the activity exceeds the protection of P.L. 86-272.
Establishing that the disqualifying activities only account for a relatively
small part of the business conducted within the taxing state is not
determinative of whether a de minimis level of activity exits.
The relative economic importance of the disqualifying instate activities, as
compared to the protected activities, does not determine whether the conduct of
the disqualifying activities within the taxing state is inconsistent with the
limited protection afforded by P.L. 86-272.
(D) Examples of activities presently treated
by the signatory states (unless otherwise stated as an exception or addition)
as either non-immune or immune are as follows:
(E) Non-Immune Activities. The following
instate activities conducted (assuming they are not of a de
minimis level) will cause otherwise immune sales to lose their
immunity:
1. Making repairs or providing
maintenance;
2. Collecting current
or delinquent accounts;
3.
Investigating credit worthiness;
4.
Installing or supervising installation;
5. Conducting training courses, seminars or
lectures for personnel other than personnel involved only in
solicitation;
6. Providing any kind
of technical assistance or services, including, but not limited to, engineering
assistance or services, when one of the purposes thereof is other than the
facilitation of the solicitation of orders;
7. Investigating, handling, or otherwise
assisting in resolving customer complaints, other than mediating direct
customer complaints when the sole purpose of the mediation is to ingratiate the
sales personnel with the customer;
8. Approving or accepting orders;
9. Repossessing property;
10. Securing deposits on sales;
11. Picking up or replacing damaged or
returned property;
12. Hiring,
training or supervising personnel, other than personnel involved only in
solicitation;
13. Providing
shipping information and coordinating deliveries;
14. Maintaining a sample or display room in
excess of two (2) weeks (fourteen (14) days) at any one (1) location during the
tax year;
15. Carrying samples for
sale, exchange or distribution in any manner for consideration or other
value;
16. Owning, leasing, or
maintaining any of the following facilities or property instate:
A. Repair shop;
B. Parts department;
C. Purchasing office;
D. Employment or recruiting office;
E. Warehouse;
F. Meeting place for directors, officers or
employees;
G. Stock of goods other
than samples for sales personnel or that are used entirely ancillary to
solicitation;
H. Telephone
answering service that is formally attributed to the company or to the agent(s)
of the company in their agency status;
I. Mobile stores, that is, vehicles with
drivers who are sales personnel making sales from the vehicles; and
J. Real property or fixtures to real property
of any kind;
17.
Consigning tangible personal property to any person, including an independent
contractor;
18. Maintaining, by any
employee, an office or place of business (in-home or otherwise) that is paid
for directly or indirectly by the company and that is formally attributed to
the company or to the agent(s) of the company in their agency status, even if
the office is for the exclusive use of soliciting orders. (For example, a
telephone listing for the company or for the agents of the company in their
capacity as agents or other indications through advertising or business
literature that the company or its agents can be contacted at a specific place
shall normally be determined as the company maintaining within the state an
office or place of business attributable to the company or to its agents in
their agency status.);
19. Using
agency stock checks or any other instrument or process by which sales are made
within this state by sales personnel; and
20. Conducting any activity not listed in
subsection (2)(F) of this rule which is not entirely ancillary to requests for
orders, even if the activity helps to increase purchases; and
(F) Immune Activities. The
following instate activities will not cause the loss of immunity for otherwise
immune sales:
1. Soliciting orders for sales
by any type of advertising;
2.
Carrying samples only for display or for distribution without charge or other
consideration;
3. Owning or
furnishing autos to sales personnel;
4. Passing inquiries and complaints on to the
home office;
5. Missionary sales
activities;
6. Checking of
customers' inventories without a charge therefor (for reorder, but not for
other purposes such as quality control);
7. Maintaining sample or display room for two
(2) weeks (fourteen (14) days) or less at any one (1) location during the tax
year;
8. Soliciting of orders for
sales by an instate resident employee of the company; provided the employee
maintains no instate sales office or place of business (in-home or otherwise)
that is attributable to the company's agent(s) in their agency
capacity;
9. Recruiting, training
or evaluating sales personnel, including occasional use of homes, hotels or
similar places for meetings with sales personnel;
10. Maintaining, by any sales employee, an
in-home office that is not paid for directly or indirectly by the company and
which is not attributable to the company or to the company's agent(s) in their
agency capacity; and
11. Mediating
direct customer complaints when the purpose of this is solely for ingratiating
the sales personnel with the customer and facilitating requests for
orders.
(3)
Independent Contractors. P.L. 86-272 provides immunity to certain in-state
activities if conducted by an independent contractor that would not be afforded
if performed by the company or its agents or other representatives. Independent
contractors may engage in the following limited activities in the state without
the company's loss of immunity:
(A) Soliciting
sales;
(B) Making sales;
and
(C) Maintaining an
office.
(4) Sales
representatives who represent a single principal are not considered to be
independent contractors and are subject to the same limitations as those
provided under sections (2) and (3) of this statement.
(5) Maintenance of a stock of goods in the
state by the independent contractor under consignment or any other type of
arrangement with the company, except for purposes of display and solicitation,
shall remove the immunity.
Notes
State regulations are updated quarterly; we currently have two versions available. Below is a comparison between our most recent version and the prior quarterly release. More comparison features will be added as we have more versions to compare.
No prior version found.