Section 280-RICR-20-25-8.9 - Public Law 86-272 (15 U.S.C. Sections 381-384) - Solicitation Defined; Protected ActivitiesA.Section 101 of Public Law 86-272, codified at 15 U.S.C. §§ 381 - 384, prohibits a state from taxing the income of a foreign corporation whose only business activities within the state consist of "solicitation of orders" for tangible personal property, provided that the orders are sent outside the state for approval or rejection and the tangible personal property is shipped or delivered from out of state. For purposes of 15 U.S.C. §§ 381 - 384 ( Public Law 86-272), solicitation is defined as follows: 1. Solicitation means speech or conduct which explicitly or implicitly invites an order and activities that neither explicitly, nor implicitly, invite an order, but which are entirely ancillary to requests for an order.a. Ancillary activities are those activities that serve no independent business function for the seller apart from their connection to the solicitation of orders. The mere assignment of activities to sales personnel does not, merely by such assignment, make such activities ancillary to solicitation of orders. Activities not entirely ancillary include those that the company would have reason to engage in anyway, but chooses to allocate to its in-state sales force. Activities that seek to promote sales are not ancillary unless, taken as whole, they are de minimis.b. De minimis activities are those that, when taken together as a whole, establish only a trivial connection with the taxing state. An activity conducted within a taxing state on a regular or systematic basis or pursuant to a company policy, whether such policy is in writing or not, shall not ordinarily be considered trivial. Whether or not an activity consists of a trivial or non-trivial connection with the State is to be measured on both a qualitative and quantitative basis. If such activity either qualitatively or quantitatively creates a non-trivial connection with the taxing state, then such activity exceeds the protection of 15 U.S.C. § 381 ( P.L. 86-272). c. Example (1) Corporation H, a manufacturer located outside Rhode Island, sends a small team of officers and employees into Rhode Island to meet with potential suppliers for purposes of a plant tour. The officers and employees are in Rhode Island for two days and conduct no other activity in the state. This is de minimis activity and the connection with Rhode Island is only trivial. As a result of the immunity afforded by 15 U.S.C. § 381 ( P.L. 86-272), Rhode Island is not permitted to impose tax.2. Only the solicitation for orders of tangible personal property is afforded protection under 15 U.S.C. §§ 381 - 384 ( Public Law 86-272); therefore, the leasing, renting, licensing or other disposition of tangible personal property, or transactions involving intangibles, such as franchises, patents, copyrights, trademarks, service marks, and the like, or any other type of property are not protected activities under 15 U.S.C. §§ 381 - 384 ( Public Law 86-272). The solicitation, sale, or performance of any type of service is also not protected under 15 U.S.C. §§ 381 - 384 ( Public Law 86-272) unless entirely ancillary to solicitation for an order for tangible personal property, de minimis, or otherwise protected under this regulation.B. In accordance with 15 U.S.C. §§ 381 - 384 ( Public Law 86-272), certain activities of foreign corporations shall be considered protected activities for purposes of corporate income tax nexus. This means that companies engaged in such activities, and nothing more, shall not through such activities alone be considered to have corporate income tax nexus with the State. The protection from state taxation afforded by 15 U.S.C. §§ 381 - 384 ( Public Law 86-272) and under the provisions of this Part shall be determined on a tax-year by tax-year basis. Therefore, if at any time during a tax year the company conducts activities that are not protected by 15 U.S.C. §§ 381 - 384 ( Public Law 86-272) or this regulation, then no sales in this state or income earned by a company attributed to this state during any part of that year will be protected from taxation under 15 U.S.C. §§ 381 - 384 ( Public Law 86-272) or this Regulation. The effect of a company's activities is cumulative and all activities must be considered as a whole when determining corporate income tax nexus. The protected activities enumerated below are intended as guidelines; they are not exhaustive and will not precisely describe the activities of many foreign corporations. In light of the foregoing, the following activities shall be considered protected activities for purposes of corporate income tax nexus in this State: 1. Soliciting orders for sales of tangible personal property through advertising activities that do not make use of a physical presence in the State.2. Soliciting of orders for tangible personal property by an in-state resident employee or representative of the company, so long as such person does not maintain or use any office or other place of business in the state other than an "in-home" office as described in this Regulation.3. Carrying samples of tangible goods and related promotional materials only for display or distribution without charge or other consideration.4. Furnishing and setting up display racks of tangible goods and advising customers on the display of the company's products without charge or other consideration.5. Providing automobiles to sales personnel for their use in conducting protected activities.6. Passing orders, inquiries, and complaints related to tangible goods on to the home office.7. Missionary sales activities; i.e., the solicitation of indirect customers for the company's tangible goods. For example, a manufacturer's solicitation of retailers to buy the manufacturer's goods from the manufacturer's wholesale customers would be protected if such solicitation activities are otherwise immune.8. Coordinating shipment or delivery without payment or other consideration and providing information relating thereto either prior to or subsequent to the placement of an order for tangible goods.9. Checking of customers' inventories without a charge therefore (for re-order, but not for other purposes such as quality control). 10. Maintaining a sample or display room for two weeks (14 days) or less within the state during the tax year.11. Recruiting, training or evaluating sales personnel, including occasionally using homes, hotels, or similar places for meetings with sales personnel.12. Mediating direct customer complaints when the purpose thereof is solely for ingratiating the sales personnel with the customer and facilitating requests for orders of tangible goods.13. Owning, leasing, using, or maintaining personal property for use in the employee or representative's "in-home" office or automobile that is solely limited to the conducting of protected activities. The use of personal property such as a cellular telephone, fax machine, duplicating equipment, personal computer and computer software that is limited to the carrying on of protected solicitation and activity entirely ancillary to such solicitation, by itself, will not remove the protection under regulation. 14. Shipping or delivering tangible goods into this state by means of private vehicle, rail, water, air or other carrier, irrespective of whether a shipment or delivery fee or other charge is imposed, directly or indirectly, upon the purchaser.15. Non-controlling ownership of shares in a corporation that does business in Rhode Island.16. Depositing of funds or maintaining securities brokerage accounts with financial institutions unrelated to the foreign corporation that do business in Rhode Island.C. Independent contractors. 1. Independent contractors may engage in the following limited activities within the State on behalf of an out-of-state hiring company, without the hiring company's loss of immunity: a. Soliciting orders for sales of tangible personal property.b. Making sales of qualifying tangible personal property. c. Maintaining an office.2. 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 15 U.S.C. §§ 381 - 384 ( Public Law 86-272). Maintenance of a stock of goods in the State by the independent contractor under consignment or any other type of arrangement with the out-of-state hiring company, except for purposes of display and solicitation, shall remove the hiring company's protection from taxation under 15 U.S.C. §§ 381 - 384 ( Public Law 86-272), unless such activities are de minimis.D. A company that registers or otherwise voluntarily qualifies to do business within this state does not, by that fact alone, lose its protection under Public Law 86-272. Where, separate from or ancillary to such registration or qualification, a company receives and seeks to use or protect any additional benefit or protection from the State through activity not otherwise protected under 15 U.S.C. §§ 381 - 384 ( Public Law 86-272) or this Regulation, the protection afforded by 15 U.S.C. §§ 381 - 384 ( Public Law 86-272) shall be lost.E. Federal Limitations. A foreign corporation's activities will not subject it to the corporate income tax jurisdiction of Rhode Island if the United States Constitution or laws of the United States preclude the exercise of jurisdiction.280 R.I. Code R. § 280-RICR-20-25-8.9