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

Universal Citation: 12 MO Code of State Regs 10-2.180

Current through Register Vol. 49, No. 18, September 16, 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.

(3) Independent Contractors. P.L. 86-272 provides immunity to certain in-state activities if conducted by an independent contractor that would not be afforded if performed by the company or its agents or other representatives. Independent contractors may engage in the following limited activities in the state without the company's loss of immunity:

(A) Soliciting sales;

(B) Making sales; and

(C) Maintaining an office.

(4) Sales representatives who represent a single principal are not considered to be independent contractors and are subject to the same limitations as those provided under sections (2) and (3) of this statement.

(5) Maintenance of a stock of goods in the state by the independent contractor under consignment or any other type of arrangement with the company, except for purposes of display and solicitation, shall remove the immunity.

*Original authority: 143.961, RSMo 1972.

Disclaimer: These regulations may not be the most recent version. Missouri may have more current or accurate information. We make no warranties or guarantees about the accuracy, completeness, or adequacy of the information contained on this site or the information linked to on the state site. Please check official sources.
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