Alabama Administrative Code › Title 810 - ALABAMA DEPARTMENT OF REVENUE › Chapter 810-27-1 - MULTISTATE TAX COMPACT › Section 810-27-1-.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 rule
			 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 rule reflects Alabama's
			 practice with regard to:
1. Whether a
			 particular factual circumstance is considered under P.L. 86-272 or permitted
			 under this rule as either protected or not protected from taxation by reason of
			 P.L. 86-272 under Sees.
			 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 Sec.
			 40-27-1, Article IV.16 (b).