Section 3. Exception for Solicitation
Activities Protected by Pub. L. 86-272, codified as
15 U.S.C.
381 to
384.
(1) General; preemption of state law. This
administrative regulation adopts a narrow interpretation of the immunity
afforded by Pub. L. 86-272, codified as
15 U.S.C.
381 to
384, which precludes
the imposition of Kentucky income tax upon a foreign corporation, or the filing
requirement imposed on foreign pass-through entity, if the corporation's or
pass-through entity's sole activity in Kentucky is the corporation's or
pass-through entity's representatives soliciting orders for the sale of
tangible personal property in the name of the corporation or pass-through
entity or in the name of a prospective customer if the orders are:
(a) Sent outside of Kentucky for approval or
rejection; and
(b) Filled by
shipment or delivery from a point outside of Kentucky regardless of the method
of shipment or delivery.
(2) Scope of Pub. L. 86-272, codified as
15 U.S.C.
381 to
384.
(a) If a corporation or pass-through entity
engages both in protected solicitation activities and in any other activity
that is not a protected solicitation activity, it shall not claim the immunity
granted by Pub. L. 86-272, codified as
15 U.S.C.
381 to
384.
(b) Solicitation of orders shall not be
protected by Pub. L. 86-272, codified as
15 U.S.C.
381 to
384, if the
solicitation is for the:
1. Sale or provision
of services; or
2. Sale, lease,
rental, license, or other disposition of real property or
intangibles.
(3) Activities normally considered to be
solicitation. The activities listed in this subsection shall serve as examples
of activities that ordinarily fall within the scope of "solicitation" under
Pub. L. 86-272, codified as
15 U.S.C.
381 to
384:
(a) Soliciting orders through
advertising;
(b) Carrying samples
and promotional materials only for display or distribution without charge or
other consideration;
(c) Soliciting
orders by an in-state resident employee or representative of the company, if
that person does not maintain or use any office or other place of business in
the state other than an "in-home" office as described in subsection (4) of this
section;
(d) Furnishing and setting
up display racks and advising customers on the display of the company's
products without charge or other consideration;
(e) Checking customer inventories for reorder
without a charge therefore, but not for other purposes such as quality
control;
(f) Recruiting, training
or evaluating sales personnel, including occasionally using homes, hotels, or
similar places for meetings with sales personnel;
(g) Conducting solicitation activities from
an employee's in-home work space, if the use of the space is not paid for by
the company;
(h) Performing
missionary sales activities, including the solicitation of indirect customers
for the company's goods. For example, a manufacturer's solicitation of
retailers to buy the manufacturer's goods from the manufacturer's wholesale
customers would be protected if the solicitation activities were otherwise
immune;
(i) Coordinating shipment
or delivery without payment or other consideration and providing information
relating thereto either prior or subsequent to the placement of an
order;
(j) Maintaining a sample or
display area for an aggregate of fourteen (14) calendar days or less at any one
(1) location within Kentucky during the tax year, if no other activities
inconsistent with solicitation take place;
(k) Mediating direct customer complaints if
the purposes are solely to ingratiate sales personnel with the customer and
facilitate requests for orders;
(l)
Passing orders, inquiries, and complaints on to the home office;
(m) Providing automobiles to sales personnel
for use solely in solicitation activities; and
(n) Owning, leasing, using, or maintaining
personal property for use in the employee or representative's "in-home" office
or automobile that is solely limited to the conducting of solicitation
activities. The use of personal property, such as a cellular telephone,
facsimile machine, duplicating equipment, personal computer, or computer
software that is limited to the carrying on of protected solicitation and
activity entirely ancillary to solicitation or permitted by this section shall
not, by itself, remove the protection.
(4) Activities that are not solicitation. The
activities listed in this subsection shall serve as examples of activities in
this state that fall outside the scope of "solicitation" and are not protected
by Pub. L. 86-272, codified as
15 U.S.C.
381 to
384 unless the
activity is de minimis within the meaning of Wisconsin Dept. of Revenue v.
William Wrigley, Jr., Co., 112 S.Ct. 2447 (1992):
(a) Making repairs or providing maintenance
or service to the property sold or to be sold;
(b) Installing or supervising installation at
or after shipment or delivery;
(c)
Collecting current or delinquent accounts, whether directly or by third
parties, through assignment or otherwise;
(d) Investigating credit;
(e) Repossessing property;
(f) Conducting training courses, seminars, or
lectures for personnel other than personnel involved only in
solicitation;
(g) Investigating,
handling, or otherwise assisting in resolving customer complaints, other than
mediating direct customer complaints if the sole purpose of the mediation is to
ingratiate the sales personnel with the customer;
(h) Approving or accepting orders;
(i) Securing deposits on sales;
(j) Picking up or replacing damaged or
returned property, including stale or unsaleable property;
(k) Maintaining a sample or display area for
an aggregate of fifteen (15) days or more at any one (1) location within
Kentucky during the tax year;
(l)
Providing technical assistance or service, including engineering assistance or
design service, if one (1) of the purposes of it is other than the facilitation
of the solicitation of orders;
(m)
Hiring, training, or supervising personnel for activities other than
solicitation;
(n) Using agency
stock checks or any other instrument or process by which sales are made within
this state by sales personnel;
(o)
Carrying samples for sale, exchange, or distribution in any manner for
consideration or other value;
(p)
Providing shipping information and coordinating deliveries;
(q) Supervising the operations of a
franchisee or similar party;
(r)
Monitoring, inspecting, or approving work performed by an independent
contractor under a warranty or similar contractual arrangement;
(s) Consigning stock of goods or other
tangible personal property for sale to any person, including an independent
contractor;
(t) Fulfilling sales
orders by shipment or delivery from a point within Kentucky;
(u) Owning, leasing, maintaining, or
otherwise using as part of the business operations in Kentucky any of the
following facilities or property:
1. Repair
shop;
2. Parts
department;
3. Warehouse;
4. Meeting place for directors, officers, or
employees;
5. Stock of goods other
than samples for sales personnel or that are used entirely ancillary to
solicitation; or
6. Telephone
answering service that is publicly attributed to the company or to an employee
or agent of the company in their representative status;
(v) Maintaining, by any employee or other
representative, an office or place of business of any kind other than an
in-home office. For the purpose of this subsection, it shall not be relevant
whether the company pays directly, indirectly, or not at all for the cost of
maintaining the in-home office. An office shall be considered in-home if it is
located within the residence of the employee or representative, and:
1. Is not publicly attributed to the company
or to the employee or representative of the company in an employee or
representative capacity. Factors considered in determining if an office is
publicly attributed to the company or to the employee or representative of the
company in an employee or representative capacity shall include:
a. A telephone listing or other public
listing within the state for the company, or for an employee or representative
of the company in that capacity, or other indications through advertising or
business literature that the company or its employee or representative can be
contacted at a specific address within the state;
b. The normal distribution and use of
business cards and stationery identifying the employee's or representative's
name, address, telephone and fax numbers, and affiliation with the company
shall not, by itself, be considered as advertising or otherwise publicly
attributing an office to the company or its employee or representative;
or
c. The maintenance of any office
or other place of business in this state that does not strictly qualify as an
"in-home" office as described in this paragraph shall, by itself, cause the
loss of protection under this subsection;
2. The use of the office is limited to:
a. Soliciting and receiving orders from
customers;
b. Transmitting orders
outside the state for acceptance or rejection by the company; or
c. Other activities that are protected under
Pub. L. 86-272, codified as
15 U.S.C.A.
381 to
384 or under this
administrative regulation;
(w) Entering into franchising or licensing
agreements, selling or otherwise disposing of franchises and licenses, or
selling or otherwise transferring tangible personal property pursuant to the
franchise or license by the franchisor or licensor to its franchisee or
licensee within the state; or
(x)
Conducting any other activity, which is not entirely ancillary to the
solicitation of orders, even if the activity helps to increase
purchases.