A. This Rule
describes activities that are sufficient for creating corporate income tax
nexus between the State of Rhode Island and a foreign corporation. The
activities enumerated in this Rule below are intended merely as guidelines. The
activities enumerated are not exhaustive and will not precisely describe the
activities of many foreign corporations.
B. Any amount of physical presence, however
limited, will presumptively trigger income tax nexus between a foreign
corporation and the State. Physical presence is determined on a case-by-case
basis, according to the applicable facts and circumstances. Physical presence
can be established through the holding of property or the activities of agents,
representatives, or independent contractors who act as representatives of a
foreign corporation in maintaining the foreign corporation's ability to market
goods and services in the State. The burden is on the taxpayer to rebut the
presumption of corporate income tax nexus when there is any amount of physical
presence.
1. Example.
a. Intangible, Inc. is a foreign corporation
that holds intangible assets. Intangible has no employees, tangible property,
or sales. However, the majority of its corporate functions are performed in
Rhode Island. These functions include maintaining books and records, holding
directors' meetings and making day-to-day business decisions. The corporate
functions are performed in Rhode Island by the directors or by employees of an
affiliate. Intangible has nexus with Rhode Island.
C. In the absence of physical
presence, substantial nexus with a foreign corporation can be established
through the foreign corporation's economic presence in the State. Substantial
nexus for corporate income tax purposes requires that a foreign corporation has
created continuing obligations and relationships with State residents such that
the foreign corporation has purposefully availed itself of State markets,
benefits, or protections, or that the corporation is subject to State
regulation and sanctions for the consequences of its actions. Additional
factors that serve to demonstrate sufficient economic presence to establish
substantial nexus with the State include, but are not limited to, the presence
of a foreign corporation's moveable property or lease interests in the State,
the presence of a foreign corporation's representatives in the State, and a
foreign corporation's controlling ownership of in-state pass-through entities,
as well as other activities enumerated in §
8.10(D) of this Part.
D. The in-state activities by a foreign
corporation that are enumerated in this provision shall trigger corporate
income tax nexus with the State, so long as they are not of a de minimis
character. The activities enumerated in this provision shall not be considered
as either solicitation of orders for tangible personal property or as
activities that are entirely ancillary to such solicitation. In-state
activities by foreign corporations that will trigger corporate income tax nexus
with the State include, but are not limited to, the following:
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
creditworthiness or issuing lines of credit or credit cards to in-state
residents.
4. Installation or
supervision of installation at or after shipment or delivery.
5. Conducting training courses, seminars, or
lectures for personnel other than personnel involved only in
solicitation.
6. Providing any kind
of technical assistance or service including, but not limited to, engineering
assistance or design service, 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 such 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 or stale or unsaleable 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) within the state 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 in-state:
a. Repair shop
b. Parts department
c. Any kind of office other than an in-home
office
d. Warehouse
e. Meeting place for directors, officers, or
employees
f. Stock of goods other
than samples for sales personnel or that are used entirely ancillary to
solicitation
g. Telephone answering
service that is publicly attributed to the company or to employees or agent(s)
of the company in their representative status
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 stock of goods or other tangible personal property to any person,
including an independent contractor, for sale.
18. Maintaining wholesaling activities
directed into the State.
19.
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 representative.
a. The
maintenance of an in-home office as described above shall only be considered a
protected activity so long as the in-home office (1) is not publicly attributed
to the company or to the employee or representative of the company in an
employee or representative capacity; and (2) so long as the use of such office
is strictly limited to soliciting and receiving orders from customers, for
transmitting such orders outside the state for acceptance or rejection by the
company, or for such other activities that are protected under 15 U.S.C.
§§
381 - 384 ( Public Law 86-272).
b. A telephone listing or other public
listing within the state for the company or for an employee or representative
of the company in such 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 shall normally be determined
as the company maintaining within this state an office or place of business
attributable to the company or to its employee or representative in a
representative capacity. This includes the posting of such information on a
company website. However, 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.
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 above shall, by itself, cause the loss of protection under
this regulation. For the purpose §
8.10(D)(19)(c) of this Part, it is not relevant whether the company pays directly, indirectly,
or not at all for the cost of maintaining such in-home office.
20. Entering into franchising or
licensing agreements, including licensing the use of trade names to in-state
affiliates; selling or otherwise disposing of such franchises and licenses; or
selling or otherwise transferring tangible personal property pursuant to such
franchise or license by the franchisor or licensor to its franchisee or
licensee within the state.
a. Example
(1) Rhode Island Retailer transfers its
trademarks to Friendly Corporation in Delaware which then licenses these
intangibles back to Rhode Island Retailer in exchange for royalty payments.
Rhode Island Retailer and Friendly Corporation are closely related affiliates.
Friendly Corporation has no physical presence in this state. Because Friendly
Corporation licenses trademarks to an in-state affiliate, Friendly Corporation
has nexus in Rhode Island.
21. Licensing the use of non-trademark
intangible property to in-state affiliates.
22. Conducting any activity not enumerated in
§
8.10 of
this Part as a protected activity, which is not entirely ancillary to
solicitations for orders of tangible personal property, even if such activity
helps to increase sales.
23.
Ownership of in-state LLCs, partnerships, and other pass-through entities or
owning an interest in any partnership or other pass-through entity whose
activities, if conducted by a foreign corporation, would give Rhode Island
jurisdiction over the foreign corporation under R.I. Gen. Laws Chapter 44-11,
unless the activities of the partnership or pass-through entity are limited to
activities protected under 15 U.S.C. §§
381 - 384 ( Public Law 86-272
).
24. Performing
services.
25. Installing or
supervising installation at or after shipment or delivery.
26. Providing consulting services.
