A foreign corporation that has nexus with Maine is
nevertheless not subject to the Maine income tax if its activities in this
State are all activities that are set forth in
P.L.
86-272.
P.L.
86-272 precludes Maine from imposing a tax on the
income of a foreign corporation if the sole activity of the foreign corporation
in the State is the solicitation by the foreign corporation's representatives
(in the name of the foreign corporation or in the name of a prospective
customer) of orders for the sale of tangible personal property, provided that
the orders are sent outside of the State of Maine for approval or rejection,
and provided that the orders are filled by shipment or delivery outside of
Maine. Some examples of common solicitation activities are found at subsection
(D) of this section below. See subsection (E) of this
section below for examples of unprotected activities.
A.
Limitations.
P.L.
86-272 restricts a state's income tax jurisdiction
only if the taxpayer's activity is limited to solicitation of orders for the
sale of tangible personal property.
P.L.
86-272 does not afford protection in
the following circumstances:
1. A
combination of solicitation activities and non-solicitation
activities in Maine;
2. The
solicitation of orders for the sale or provisions of services,
either standing alone or in combination with the solicitation of orders for
tangible property. Some examples of the sale of a mixture of services and
tangible personal property are photographic development and the provision of
architectural or engineering services; and 3. The solicitation of orders for
the sale, lease, rental, license, or other disposition of real
property or intangibles.
B.
Scope of "solicitation."
Whether the activities of a foreign corporation fall within the scope of
"solicitation" within the meaning of
P.L.
86-272 is a factual determination. The examples of
activities provided at subsection (D) and (E) of this
section below are intended as guidelines. They are not exhaustive and will not
precisely describe the activities of many foreign corporations. In applying the
guidelines to particular circumstances and activities of specific foreign
corporations, the Assessor will use the following rules of construction:
1. The term "solicitation" includes only
actual requests for purchases and activities that are entirely ancillary to
requests for purchases. An activity is entirely ancillary to the requesting of
purchases only if it serves no independent business purpose apart from its
connection to the soliciting of orders.
2. Activities conducted by a foreign
corporation with respect to a particular order generally do not constitute
"solicitation" if they occur after the order has been
placed.
C.
De minimis activities. Non-solicitation business
activities conducted by a foreign corporation in Maine will not subject the
foreign corporation to taxation if the activities, taken together, are
de minimis. De minimis activities are those that establish
only a trivial additional connection with this State. An activity regularly
conducted within this State pursuant to company policy or on a continuous basis
will not normally be considered trivial. Whether or not an activity consists of
a trivial additional connection with Maine is measured on both a qualitative
and quantitative basis. If the activity either qualitatively or quantitatively
creates a non-trivial connection with the State of Maine, the activity does not
qualify for the protection afforded by
P.L.
86-272. Establishing that the disqualifying
activities account for a relatively small part of the business conducted within
this State is not determinative of whether a de minimis level
of activity exists. The relative economic importance of the disqualifying
in-state 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. If the Assessor believes that a taxpayer
conducts in this State any activity listed in subsection (E) of
this section below, the Assessor will require the taxpayer to carry the burden
of substantiating any claim that its activities were de
minimis. Documentary evidence will be given substantial weight in
establishing the nature and extent of the taxpayer's activities. Affidavits or
other evidence not contemporaneous with the events in question will be given
little weight.
D.
Protected
activities. The following in-state activities conducted by a foreign
corporation will not cause the loss of protection for otherwise protected sales
that occur in the State of Maine:
1.
Soliciting orders for sales by any type of advertising;
2. Soliciting of orders by an in-state
resident employee or representative of the foreign corporation, so long as such
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
(E), paragraph 20 of this section below;
3. Carrying samples and promotional materials
only for display or for distribution without charge or other
consideration;
4. Furnishing and
setting up display racks and advising customers on the display of the foreign
corporation's products without charge or other consideration;
5. Providing automobiles to sales personnel
for their use in conducting protected activities;
6. Passing orders, inquiries and complaints
on to the corporation's home office;
7. Missionary sales activities and
advertising campaigns incidental to missionary sales activities;
8. Coordinating shipment or delivery without
payment or other consideration and providing information relating thereto
either before or after the placement of an order;
9. Checking of customers' inventories without
a charge therefor (for re-order, but not for other purposes such as quality
control);
10. Maintaining a sample
or display room for an aggregate of 14 days or fewer during the tax year,
provided that no sales or other activities inconsistent with mere solicitation
take place;
11. Recruiting,
training or evaluating sales personnel, including occasionally using homes,
hotels or similar places for meetings with sales personnel;
12. Mediating direct customer complaints with
the sole purpose of ingratiating the sales personnel with the customer and
facilitating requests for orders; and
13. Owning, leasing, using or maintaining
personal property for use in the "in-home" office or automobile of an employee
or representative, when the use of the personal property is limited to the
conducting of protected activities. Thus the use by a foreign corporation's
employee or representative of equipment such as a cellular telephone, facsimile
machine, photocopier or personal computer, when limited strictly to the
carrying on of protected solicitation and activity entirely ancillary to such
solicitation or permitted by this rule, does not, by itself subject the foreign
corporation to Maine's income tax jurisdiction.
E.
Unprotected activities. The
following in-state activities (assuming they are not de
minimis -- see subsection (C) in this section above) will cause
otherwise protected activities to lose their protection:
1. Making repairs or providing maintenance or
service to the property sold or to be sold;
2. Collecting current or delinquent accounts,
whether directly or by third parties, through assignment or
otherwise;
3. Investigating credit
worthiness;
4. Installation or
supervision of installations at or after shipment or delivery;
5. Conducting training courses, seminars or
lectures for personnel other than personnel involved only in
solicitations;
6. Providing any
kind of technical assistance or services, including, but not limited to,
engineering assistance or design services, unless the purpose of such
assistance or services is solely to facilitate the solicitation of
orders;
7. Investigating, handling,
or otherwise assisting in resolving customer complaints, other than mediating
direct customer complaints with the sole purpose of ingratiating sales
personnel with the customer and facilitating requests for orders;
8. Approving or accepting orders;
9. Repossessing property;
10. Securing deposits on sales;
11. Picking up or replacing damaged or
returned property or stale or unsalable inventory;
12. Hiring, training, or supervising
personnel, other than personnel involved only in solicitation;
13. Using agency stock checks or any other
instrument or process by which sales are made within this state by sales
personnel;
14. Maintaining a sample
or display room in excess of two weeks (14 days) at any one location during the
tax year;
15. Carrying samples for
sale, exchange, or distribution in any manner for consideration or other
value;
16. Owning, leasing, using,
or maintaining any of the following facilities or property:
a. Repair shop.
b. Parts department.
c. Any kind of office other than an in-home
office as described in subsection (20) of this section
below.
d. Warehouse.
e. Meeting place for directors, officers, or
employees.
f. Stock of goods other
than samples for sales personnel or goods used entirely ancillary to
solicitation.
g. Telephone
answering service that is publicly attributed to the company or to an employee
or agent of the company.
h. Mobile
stores, i.e., vehicles with drivers who are sales personnel
making sales from the vehicles.
i.
Real property or fixtures to real property of any kind.
17. Consigning stocks of goods or other
tangible personal property to any person, including an independent contractor,
for sale;
18. Conducting any
activity not listed in subsection (D) of this section that is not
entirely ancillary to requests for orders, even if such activity helps to
increase orders;
19. Except as
provided by 36 M.R.S. §
5200- B(3), owning an interest in
any partnership, grantor trust, or other pass-through entity whose activities,
if conducted directly by a foreign corporation, would give Maine jurisdiction
over the foreign corporation, unless the activities of the pass-through entity
are limited to solicitation protected by
P.L.
86-272;
20. Maintaining, by any employee or other
representative, an office or place of business of any kind, other than an
in-home office located within the residence of the employee or other
representative that (1) is not publicly attributed to the company or to the
employee or representative of the company in such capacity, and (2) is used
solely for soliciting and receiving orders from customers, for transmitting
such orders outside the state for acceptance or rejection by the corporation,
or for other activities protected by
P.L.
86-272 or subsection (D) of this
section. If the corporation maintains a telephone or other public listing
within the state either in its own name or in the name of its employee or
representative in such capacity, or if there is any other indication through
advertising or business literature that the corporation or its employee or
representative can be contacted at a specific address within the state, the
Assessor will normally view the corporation's activities as exceeding the
protection afforded by P.L.
86-272. However, the normal distribution and use
of business cards and stationery identifying the employee or representative's
name, address, telephone and fax numbers and affiliation with the company will
not, by itself, be considered unprotected activity. 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 above causes the loss of protection. For
the purpose of this rule, it is not relevant whether the corporation pays
directly, indirectly, or not at all for the cost of maintaining an in-home
office; and
21. Entering into a
franchising or licensing agreement; selling or otherwise disposing of
franchises and licenses; or selling or otherwise transferring tangible personal
property pursuant to such franchise or license by the franchiser or licensor to
its franchisee or licensee with the state.
