Public Law 86-272 has long been used to protect out-of-state businesses from being taxed on net income earned in other states if the only business activity of the company within the other states consists of the solicitation of orders for sales of tangible personal property (TPP).
The rules contained in PL 86-272 are lengthy, and at times, complex, ranging from what activities consist of “solicitation of orders” and whether other activities are ancillary to the solicitation, to the long list of unprotected activities that can cause a company to lose protection under PL 86-272 including collecting payment on an order or making repairs to the TPP.
PL 86-272 was originally adopted by the Multistate Tax Commission in 1986 and revised in 1993, 1994, and 2001.
A bill has recently been introduced to the U.S. Senate seeking to define the “solicitation of orders” as, “any business activity that facilitates the solicitation of orders even if that activity may also serve some independently valuable business function apart from solicitation.”
To read more about S.5158, click here.