Alabama Administrative Code › Title 810 - ALABAMA DEPARTMENT OF REVENUE › Chapter 810-27-1-4 - MULTISTATE TAX COMPACT › Section 810-27-1-4-.19 - Public Law 86-272 Exemption From Income Tax

Current through Register Vol. 42, No. 9, June 28, 2024
(1) Scope.
(a)Public Law 86-272,
			 15 U.S.C.
			 381 -
			 384, (hereafter "
			 P.L. 86-272 ") restricts a state from imposing a net income tax on income
			 derived within its borders from interstate commerce if the only business
			 activity of the company within the state consists of the solicitation of orders
			 for sales of tangible personal property, which orders are to be sent outside
			 the state for acceptance or rejection, and, if accepted, are filled by shipment
			 or delivery from a point outside the state. The term "net income tax" includes
			 a franchise tax measured by net income. If any sales are made into a state
			 which is precluded by P.L. 86-272 from taxing the income of the seller, such
			 sales remain subject to throwback to the appropriate state which does have
			 jurisdiction to impose its net income tax upon the income derived from those
			 sales.
(b) Signatory State is a
			 state which has signed the Statement of Information Concerning Practices of
			 Multistate Tax Commission and Signatory States under Public Law 86-272, as
			 amended, from time to time.
(c) It
			 is the policy of Alabama hereto to impose its net income tax, subject to
			 Alabama and Federal legislative limitations, to the fullest extent
			 constitutionally permissible. Interpretation of the solicitation of orders
			 standard in P.L. 86-272 requires a determination of the fair meaning of that
			 term in the first instance. The United States Supreme Court has recently
			 established a standard for interpreting the term "solicitation" and this
			 regulation has been revised to conform to such standard. Wisconsin Department
			 of Revenue v. William Wrigley, Jr., Co., 505 U.S. ___, 112 S. Ct. 2447, 120 L.
			 Ed. 2d 174 (1992). In those cases where there may be reasonable differences of
			 opinion between Alabama and a Signatory State as to whether the disputed
			 activity exceeds what is protected by P.L. 86-272, Alabama will apply the
			 principle that the preemption of state taxation that is required by P.L. 86-272
			 will be limited to those activities that fall within the "clear and manifest
			 purpose of Congress." See Department of Revenue of Oregon v. ACF Industries,
			 Inc., et al., ____ U.S. ___, 114 S. Ct. 843, 127 L. Ed. 2d 165 (1994),
			 Cipollone v. Liggett Group, Inc., 505 U.S. ___, 112 S. Ct. 2608, 120 L. Ed. 2d
			 407, 422 (1992); Heublein, Inc. v. South Carolina Tax Com., 409 U.S. 275, 281 -
			 282(1972).
(d) The following
			 regulation reflects Alabama's practice with regard to:
1. whether a particular factual circumstance
			 is considered under P.L. 86-272 or permitted under this regulation as either
			 protected or not protected from taxation by reason of P.L. 86-272 under
			 Sections
			 40-18-31 or
			 40-27-1,
			 Article IV.2; and
2. the
			 jurisdictional standards which will apply to sales made in another state for
			 purposes of applying a throwback rule with respect to such sales under Section
			 40-27-1,
			 Article IV.16(b).