Current through Register Vol. 56, No. 18, September 16, 2024
(a) The term
"doing business" is used in a comprehensive sense and includes all activities that
occupy the time or labor of men or women for profit.
1. Regardless of the nature of its activities,
every corporation organized for profit and carrying out any of the purposes of its
organization within the State shall be deemed to be "doing business" for the
purposes of the Corporation Business Tax Act.
2. In determining whether a corporation is "doing
business", it is immaterial whether its activities result in a profit or a
loss.
(b) Whether a foreign
corporation is doing business in New Jersey pursuant to
N.J.A.C.
18:7-1.6(a)2 iii is determined by
the facts in each case. Consideration is given to such factors as:
1. The nature and extent of the activities of the
corporation in New Jersey;
2. The
location of its offices and other places of business;
3. The continuity, frequency, and regularity of
the activities of the corporation in New Jersey;
4. The employment in New Jersey of agents,
officers, and employees; and
5. The
location of the actual seat of management or control of the corporation.
Example
Foreign corporation R holds trademarks that were assigned to it
by its parent corporation. R receives fees as a result of licensing those trademarks
to certain New Jersey companies for use in New Jersey. R is subject to the
corporation business tax on its apportioned income as a result of its trademark
licensing activities.
(c) A foreign corporation shall not be deemed to
be doing business or employing, or owning capital or property in this State for the
purposes of the Act by reason of the following:
1.
The maintenance of cash balances with banks or trust companies in New
Jersey;
2. The ownership of shares of
stock or securities kept in New Jersey in a safe deposit box, safe, vault, or other
receptacle rented for the purpose, or pledged as collateral security, or deposited
with one or more banks or trust companies, or brokers who are members of a
recognized security exchange, in safekeeping or custody accounts;
3. The taking of any action by any such bank or
trust company or broker, which is incidental to the rendering of safekeeping or
custodian service to such corporation; and
4. Any combination of the foregoing
activities.
(d) If the only
business activity of a foreign corporation within New Jersey consists of the
solicitation of orders for sales of its tangible personal property, which orders are
to be sent outside the State for acceptance or rejection and, if accepted, are to be
filed by shipment or delivery from a point outside the State, then such corporation
is doing business in New Jersey and is subject to the tax. Unless it has additional
contacts with New Jersey; however, it will not be liable for any tax measured by the
income of the corporation. (See P.L. 86-272,
15 U.S.C. §
381) . The corporation will be liable for filing a
return and payment of the minimum tax.
1. For the
in-State activities of the foreign corporation to immunize the corporation from
taxation measured by income, such activities must be limited solely to:
i. Speech or conduct that explicitly or implicitly
invites an order; and
ii. Activities
that neither explicitly nor implicitly invite an order but that are entirely
ancillary to requests for an order.
2. Examples of additional activities or contacts
with New Jersey that will subject a corporation to the tax based on or measured by
income are:
i. Repairs, maintenance, and
installations;
ii. Collection or
repossession activities;
iii. Credit
investigations;
iv. Conducting training
courses, seminars, or lectures for personnel, other than for personnel involved only
in solicitation;
v. Providing technical
assistance;
vi. Customer complaint
resolution if the sole purpose is not to ingratiate sales personnel with the
customer;
vii. Approving or accepting
orders or securing deposits on sales;
viii. Acquiring personnel for other than
solicitation activities;
ix. Maintaining
a display at a single location in excess of two weeks during the tax year;
x. Carrying samples for sale, exchange, or
distribution in any manner for consideration or other value;
xi. Owning, leasing, or maintaining in-State
facilities, such as a warehouse or answering service; and
xii. Consigning stock of goods or other tangible
personal property to any person, including an independent contractor, for
sale.
3. Examples of
additional activities that, together with the solicitation activities described in
(d)1 above will not subject a corporation to tax based on or measured by income are:
i. Soliciting through advertising;
ii. Carrying samples and promotional materials for
display or distribution without charge;
iii. Providing automobiles, owned or leased,
registered or not registered in New Jersey, to sales personnel for their use in
conducting protected activities.
iv.
Checking customer inventories without charge;
v. Maintaining a display at a single location for
less than two weeks during the tax year;
vi. Recruiting, training, or evaluating of sales
personnel;
vii. Soliciting of orders at
an in-State sales employee's in-home work space that is not paid for by the company;
and
viii. Mediating customer complaints
if just to ingratiate sales personnel with the customer.
(e) Independent contractors may solicit
or make sales or maintain an office without subjecting a company to liability for
corporation business tax based on or measured by income. Sales representatives who
represent a single principal would not be considered independent contractors. A
corporation would be subject to income-based tax, if the independent contractor
maintained a stock of goods in the State under consignment or for purposes other
than for display and solicitation.
