15 U.S.C. § 381 — Imposition of net income tax

submitted 67 years ago by Pub. L. 86-272 to r/title-15-COMMERCE-AND-TRADE · 414 words · no verdicts yet

in plain englishAI-generated · not legal advice

A state can't tax a company's income if the company only solicits mail-in orders there. This protection doesn't apply to companies incorporated or living in that state. Using independent contractors to sell in a state also keeps this protection.

(a) Minimum standards. For any tax year ending after September 14, 1959, a state (or a political subdivision of a state) cannot tax a company's income earned within that state from interstate commerce, if the company's only business activity in that state is one or both of the following: (1) soliciting orders there for sales of tangible personal property, where the orders are sent outside the state for approval or rejection, and, if approved, are filled by shipping or delivering the goods from outside the state; or (2) soliciting orders there on behalf of one of the company's own customers, where that customer's resulting orders back to the company would themselves qualify under paragraph (1). (b) Domestic corporations; persons domiciled in or residents of a state. This protection in subsection (a) does not apply to a state's power to tax: (1) a corporation that is incorporated under that state's laws; or (2) an individual who, under that state's laws, is domiciled in, or a resident of, that state. (c) Sales or solicitation of orders by independent contractors. For subsection (a), a company is not considered to have done business in a state just because independent contractors made sales there, or solicited orders there, for the company's tangible personal property, or because independent contractors kept an office in the state where their only activity for the company was making or soliciting such sales. (d) Definitions. (1) "Independent contractor" means a commission agent, broker, or other independent contractor who sells, or solicits orders for the sale of, tangible personal property for more than one company, and who holds themselves out as such in the regular course of their business. (2) "Representative" does not include an independent contractor.

the actual law source: uscode.house.gov ↗public domain

(a) Minimum standards

No State, or political subdivision thereof, shall have power to impose, for any taxable year ending after September 14, 1959, a net income tax on the income derived within such State by any person from interstate commerce if the only business activities within such State by or on behalf of such person during such taxable year are either, or both, of the following:

(1)

the solicitation of orders by such person, or his representative, in such State 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 the State; and

(2)

the solicitation of orders by such person, or his representative, in such State in the name of or for the benefit of a prospective customer of such person, if orders by such customer to such person to enable such customer to fill orders resulting from such solicitation are orders described in paragraph (1).

(b) Domestic corporations; persons domiciled in or residents of a State

The provisions of subsection (a) shall not apply to the imposition of a net income tax by any State, or political subdivision thereof, with respect to—

(1)

any corporation which is incorporated under the laws of such State; or

(2)

any individual who, under the laws of such State, is domiciled in, or a resident of, such State.

For purposes of subsection (a), a person shall not be considered to have engaged in business activities within a State during any taxable year merely by reason of sales in such State, or the solicitation of orders for sales in such State, of tangible personal property on behalf of such person by one or more independent contractors, or by reason of the maintenance, of an office in such State by one or more independent contractors whose activities on behalf of such person in such State consist solely of making sales, or soliciting orders for sales, or tangible personal property.

(d) Definitions

For purposes of this section—

(1)

the term “independent contractor” means a commission agent, broker, or other independent contractor who is engaged in selling, or soliciting orders for the sale of, tangible personal property for more than one principal and who holds himself out as such in the regular course of his business activities; and

(2)

the term “representative” does not include an independent contractor.

Source credit: (Pub. L. 86–272, title I, § 101, Sept. 14, 1959, 73 Stat. 555.)

history & why it existsrecord from the source credit

1959Enacted · Pub. L. 86-272 · 73 Stat. 555

A history note hasn’t been published yet. The record shows enactment by Pub. L. 86-272 on 1959-09-14.

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