Missouri Code of State Regulations › Title 12 - DEPARTMENT OF REVENUE › Division 10 - Director of Revenue › Chapter 2 - Income Tax › Section 12 CSR 10-2.180 - Public Law 86-272 Immunity

Current through Register Vol. 49, No. 14, July 15, 2024
PURPOSE: This rule explains the department's position
				  with respect to the type and amount of activity which is immune or not immune
				  from taxation by reason of P.L. 86-272. This constitutes the changes made by
				  the Multistate Tax Commission at the 1993 annual meeting.
(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.