| (a) Constitutional limit standard. A corporation is doing business in this state, for the earned surplus component of the franchise tax, when it has sufficient contact with this state to be taxed without violating the United States Constitution. See §3.546 of this title (relating to Taxable Capital: Nexus) for the nexus standards for the taxable capital component of the franchise tax. (b) Public Law 86-272 (15 United States Code §§381-384). A corporation may be subject to the taxable capital component, but not the earned surplus component, because of Public Law 86-272. If the only business activity within this state is the solicitation of orders for sales of tangible personal property, which orders are sent outside the state for approval or rejection, and, if approved, are filled by shipment or delivery from a point outside this state, then the corporation is not subject to the earned surplus component of the franchise tax, even if the
corporation has obtained a certificate of authority. Only the sale of tangible personal property is afforded immunity under Public Law 86-272; therefore, the leasing, renting, licensing, or other disposition of tangible personal property, intangibles, or any other type of property is not immune from taxation by reason of Public Law 86-272. This subsection does not apply to a corporation chartered in Texas. (c) Solicitation of orders. (1) For the Texas activity to be immune under Public Law 86-272, it must be limited solely to solicitation (except for de minimis activities and those activities conducted by independent contractors described in this section). Solicitation means: (A) speech or conduct that explicitly or implicitly invites an order; and (B) activities that neither explicitly nor implicitly invite an order, but are entirely ancillary to requests for an order.
(2) Ancillary activities are those activities that serve no independent business function for the seller apart from their connection to the solicitation of orders. Activities that a seller would engage in apart from soliciting orders shall not be considered as ancillary 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. Additionally, activities that seek to promote sales are not ancillary, because Public Law 86-272 does not protect activity that facilitates sales; it only protects ancillary activities that facilitate the request for an order. The conduct of activities not falling within the foregoing definition of solicitation will cause the company to lose the exemption afforded by Public Law 86-272, unless the disqualifying activities, taken together, are de minimis. (3) De minimis activities are those that, when taken
together, establish only a trivial additional connection with Texas. An activity regularly conducted within Texas pursuant to a company policy or on a continuous basis shall normally not be considered trivial. Whether or not an activity consists of a trivial or non-trivial additional connection with Texas is to be measured on both a qualitative and quantitative basis. If such activity either qualitatively or quantitatively creates a non-trivial connection with Texas, then such activity exceeds the protection of Public Law 86-272. Establishing that the disqualifying activities only account for a relatively small part of the business conducted within Texas is not determinative of whether a de minimis level of activity exists. The relative economic importance of the disqualifying in-state activities, as compared to the protected activities, does not determine whether the conduct of the disqualifying activities within Texas is inconsistent with the limited protection afforded by Public
Law 86-272. (d) Examples of doing business. Some specific activities which constitute doing business in Texas, assuming they are not of a de minimis level, by a foreign corporation are: (1) making repairs or providing maintenance; (2) collecting current or delinquent accounts; (3) investigating creditworthiness; (4) installation or supervision of installation; (5) conducting training classes, seminars, or lectures for personnel other than personnel involved only in solicitation; (6) providing any kind of technical assistance or services, including, but not limited to, engineering assistance or services, 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; (12) hiring, training, or supervising personnel, other than personnel involved only in solicitation; (13) providing shipping information and coordinating deliveries; (14) maintaining a sample or display room in excess of two weeks (14 days) at any one location during the period upon which the earned surplus is based; (15) carrying samples for sale, exchange, or distribution in any manner for consideration or other value; (16) owning, leasing, or maintaining any of the following facilities or property in-state: (A) repair shop;
(B) parts department; (C) purchasing office; (D) employment or recruiting office; (E) warehouse; (F) meeting place for directors, officers, or employees; (G) stock of goods other than samples for sales personnel or that are used entirely ancillary to solicitation; (H) telephone answering service that is formally attributed to the company or to the agent(s) of the company in their agency status; (I) mobile stores, i.e., vehicles with drivers who are sales personnel making sales from the vehicles; and (J) real property or fixtures to real property of any kind; (17) consigning tangible personal property to any person, including an independent contractor; (18) maintaining, by any employee, an office or place of business (in-home or otherwise) that is paid for directly or indirectly by
the company and that is formally attributed to the company or to the agent(s) of the company in their agency status, even if such office is for the exclusive use of soliciting orders. (For example, a telephone listing for the company or for the agents of the company in their capacity as agents or other indications through advertising or business literature that the company or its agents can be contacted at a specific place shall normally be determined as the company maintaining within this state an office or place of business attributable to the company or to its agents in their agency status); (19) using agency stock checks or any other instrument or process by which sales are made within this state by sales personnel; (20) conducting any activity listed as doing business in §3.546 of this title (relating to Taxable Capital: Nexus), which is not protected by Public Law 86-272; or (21) conducting any activity not listed in
subsection (e) of this section which is not entirely ancillary to requests for orders, even if such activity helps to increase purchases. (e) Examples of protected activities. The following activities are protected by Public Law 86-272: (1) soliciting orders for sales by any type of advertising; (2) carrying samples only for display or distribution without charge or other consideration; (3) owning or furnishing autos to sales personnel; (4) passing inquiries and complaints on to the home office; (5) missionary sales activities; (6) checking of customers' inventories without a charge therefor (for reorder, but not for other purposes such as quality control); (7) maintaining a sample or display room for two weeks or less at any one location during the period upon which the earned surplus is based; (8) soliciting
of orders for sales by an in-state resident employee of the company; provided the employee maintains no in-state sales office or place of business (in-home or otherwise) that is attributable to the company or to the company's agent(s) in their agency capacity; (9) recruitment, training, or evaluation of sales personnel, including occasional use of homes, hotels, or similar places for meetings with sales personnel; (10) maintaining, by any sales employee, an in-home office that is not paid for directly or indirectly by the company and which is not attributable to the company or to the company's agent(s) in their agency capacity; or (11) mediating direct customer complaints when the purpose thereof is solely for ingratiating the sales personnel with the customer and facilitating requests for orders. (f) Independent contractors. (1) Public Law 86-272 provides immunity to certain
in-state activities if conducted by an independent contractor that would not be afforded if performed by the company or its agents or other representatives. Independent contractors may engage in the following limited activities in the state without the company's loss of immunity: (A) soliciting sales; (B) making sales; and (C) maintaining an office. (2) Sales representatives who represent a single principal are not considered to be independent contractors. (3) Maintenance of a stock of goods in the state by the independent contractor under consignment or any other type of arrangement with the company, except for purposes of display and solicitation, shall remove the immunity.
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