For Immediate Release
March 7, 2007

New York Nexus – Are you totally protected by P.L. 86-272?

New York Nexus – Are you totally protected by P.L. 86-272?

New York Nexus – Are you totally protected by P.L. 86-272?

New York discusses a corporation’s eligibility for the exemption and its filing requirements.

The Department of Taxation and Finance has issued a corporate franchise tax advisory in regard to out-of-state companies who plan to hire NY residents as sales representatives, operating out of their residences. If sales orders are approved and shipped from outside of New York and no office is maintained in NY, either in a separate location or in the sales representative’s home, and the company’s only activity in NY is the solicitation of orders pursuant to the provisions of P.L. 86-272, the company will be exempt from NY’s corporate franchise tax.

In the state of New York, to be exempt by virtue of P.L. 86-272, the activities of the foreign corporation must be limited to the following activities:

  1. the solicitation of orders by employees or representatives within the state for sales of tangible personal property, where the orders are sent outside New York for approval or rejection and, if approved, are filled by shipment or delivery from a point outside New York; and
  2. the solicitation of orders for sales of tangible personal property by employees or representatives within the state in the name of or for the benefit of a prospective customer of the foreign corporation, provided the customer’s orders are sent outside New York for approval or rejection and, if approved, are filled by shipment or delivery from a point outside of New York.

Solicitation of orders includes offering tangible personal property for sale, pursuing offers for the purchase of tangible personal property, and ancillary activities, other than maintaining an office, that serve no independent business function apart from their connection to the solicitation of orders.

However, the company would be required to annually file an activities report on Form CT-245, Maintenance Fee and Activities Return for Foreign Corporation Disclaiming Tax Liability. In addition, if the corporation is authorized to do business in New York under Article 13 or 15-A of the Business Corporation Law, the corporation would be required to pay a maintenance fee.

If you would like additional information on this topic or have any questions, please contact the taxdesk@thesaltgroup.com

 

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