Foreign corporations — Public Law 86-272 (business corporation franchise tax regulations § 1-2.10)

# Status

Section 1-2.10 of the business corporation franchise tax regulations was adopted December 27, 2023, as part of New York's corporate tax reform regulations (a 417-page adoption implementing the 2014 reform and adopting the Multistate Tax Commission's 2021 revised guidance on P.L. 86-272, including its application to activities conducted via the Internet). The regulation's internet-activity provisions were upheld in litigation in May 2026. This document is a faithful extraction of § 1-2.10 (pages 24-33 of the adopted text); the source PDF contains the complete adopted regulations.

# (a) Exemption — activities limited to those described in P.L. 86-272

Pursuant to Public Law 86-272 (15 U.S.C.A. sections 381-384), a foreign corporation is exempt from the tax imposed by article 9-A if its activities are limited to those described in that law. To be exempt, the activities of the corporation in New York State must be limited to one or more of the following: (1) the solicitation of orders by employees or representatives in New York State for sales of tangible personal property, if the orders are sent outside New York State for approval or rejection and, if approved, are filled by shipment or delivery from a point outside New York State; (2) the solicitation of orders for sales of tangible personal property by employees or representatives in New York State in the name of or for the benefit of a prospective customer, if the customer's orders to the corporation are sent outside New York State for approval or rejection and, if approved, are filled by shipment or delivery from a point outside New York State; and (3) the solicitation of orders via the Internet in New York State for sales of tangible personal property, if the orders are sent outside New York State for approval or rejection and, if approved, are filled by shipment or delivery from a point outside New York State.

# (b) Sales through independent contractors

A corporation will not be considered to have engaged in taxable activities in New York State during the taxable year merely by reason of sales in New York State, or the solicitation of orders for sales in New York State, of tangible personal property on behalf of the corporation by one or more independent contractors. A corporation will not be considered to have engaged in taxable activities by reason of maintaining an office in New York State by one or more independent contractors whose activities on behalf of the corporation consist solely of making sales, or soliciting orders for sales, of tangible personal property.

# (c) Independent contractor and representative defined

The term 'independent contractor' means a commission agent, broker, or other independent contractor who is engaged in selling, or in 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. The term 'representative' does not include an independent contractor.

# (d) Solicitation of orders; entirely ancillary activities

In order to be exempt by virtue of Public Law 86-272, the activities in New York State of employees or representatives, or activities engaged in via the Internet, must be limited to the solicitation of orders for the sale of tangible personal property. The solicitation of orders includes offering tangible personal property for sale or pursuing offers for the purchase of tangible personal property and those ancillary activities, other than maintaining an office, that serve no independent business function apart from their connection to the solicitation of orders. Examples of entirely ancillary activities include:

(1) the use of free samples and other promotional materials in connection with the solicitation of orders;

(2) passing product inquiries and complaints to the corporation's home office;

(3) using autos furnished by the corporation;

(4) advising customers on the display of the corporation's products and furnishing and setting up display racks;

(5) recruitment, training and evaluation of sales representatives;

(6) use of hotels and homes for sales-related meetings;

(7) intervention in credit disputes;

(8) use of space at the salesperson's home solely for the salesperson's convenience (but see subdivision (g) as to loss of immunity for maintaining an office);

(9) participating in a trade show or shows for not more than 14 days, or part thereof, in the aggregate during the corporation's federal taxable year (but see subdivision (g)).

# (e) Limited to tangible personal property

The exemption under the provisions of Public Law 86-272 is limited to the solicitation of orders for the sale of tangible personal property and does not include the solicitation of orders for the sale of services or intangible property.

# (f) Activities beyond solicitation; de minimis standard; website interaction

Activities in New York State beyond the solicitation of orders will subject a corporation to tax unless such activities are de minimis. Activities will not be considered de minimis if they establish a nontrivial additional connection with New York State. Solicitation activities do not include those activities that the corporation would have reason to engage in apart from the solicitation of orders but chooses to allocate to its New York State sales force, or to engage in via the Internet, including interacting with customers or potential customers through the corporation's website or computer application. However, a corporation will not be made taxable solely by presenting static text or images on its website. In determining whether a corporation's activities exceed the solicitation of orders, all of the corporation's activities in New York State will be considered. Examples of activities that go beyond the solicitation of orders include:

(1) making repairs to or installing the corporation's products;

(2) making credit investigations;

(3) collecting delinquent accounts;

(4) taking inventory of the corporation's products for customers or prospective customers;

(5) replacing the corporation's stale or damaged products;

(6) giving technical advice on the use of the corporation's products after the products have been delivered to the customer.

# (g) Maintaining an office, shop, warehouse or stock of goods

Maintaining an office, shop, warehouse or stock of goods in New York State will make a corporation taxable. However, a corporation will not be made taxable solely by maintaining a supply of goods in New York State if such goods are used only as free samples in connection with the solicitation of orders. A corporation will be considered to be maintaining an office in New York State if the space is held out to the public as an office or place of business of the taxpayer. For example, if a salesperson's house is used for business and meets the criteria to be considered a bona fide employer office for personal income tax purposes, the residence will be treated as an office of the corporation, and the corporation will be taxable.

# (h) Inclusion in combined reports

A corporation (other than a corporation that cannot be included in a combined report under section 210-C(2)(c) and section 6-2.6 of this Subchapter) may be included in a combined report required under section 210-C, even if it is exempt from taxation under article 9-A pursuant to Public Law 86-272. The receipts of such a corporation will be included in determining whether a unitary group is deriving receipts from activity in this state. However, if all the members of such a unitary group are exempt from taxation under article 9-A pursuant to Public Law 86-272, then the unitary group would not be required to file a combined report.

# (i) Examples 1-5 — traditional activities

Example 1: A foreign manufacturing corporation has its factory outside New York State. Its only activity in New York State is the solicitation of orders for its products through a sales office located in New York State. The orders are forwarded to its home office outside New York State for acceptance and the merchandise is shipped by common carrier from the factory direct to the purchasers. The corporation is subject to tax. Example 2: A foreign corporation that operates several retail stores outside New York State leases an office in New York City for the convenience of its buyers. Salespeople call at the office to solicit orders. The merchandise is shipped by the sellers directly to the offices of the corporation outside New York State. The corporation is subject to tax. Example 3: A foreign corporation sends salespeople into New York State to solicit orders, which must be accepted at the home office in another state. The corporation displays goods in New York City at a space leased occasionally and for short terms. The corporation is subject to tax. Example 4: A foreign corporation has $950,000 of receipts from activities in New York State consisting solely of protected solicitation of orders for tangible personal property, and also has $100,000 of New York receipts from the sale of services. The corporation is subject to tax; it may not disclaim tax liability under this section, since its activities in New York State are not limited to those described in this section. Example 5: Seven foreign corporations each have $200,000 of receipts from activity in New York State and are part of the same unitary group meeting the ownership test under section 210-C; together they exceed the $1 million receipts threshold. Three members' New York activities consist solely of protected solicitation — they are not subject to tax. The other four are subject to tax because they derive receipts from activity in New York State and their activities are not limited to those described in this section. The seven corporations are required to file a combined report including the receipts, net income, net gains, net losses, and net deductions of all the corporations.

# (i) Examples 6-16 — internet activities

Example 6: A foreign corporation solicits sales of tangible personal property on its website and assists customers by posting a list of static frequently asked questions (FAQs) and answers. This activity is de minimis; the corporation is exempt. Example 7: A corporation regularly provides post-delivery assistance by email or electronic chat initiated from its website, such as advising customers how to use products after delivery. Not exempt. Example 8: A corporation solicits and receives online applications for its branded credit card via its website; the cards generate interest income and fees. Not exempt. Example 9: A corporation's website invites New York viewers to apply for non-sales positions, uploading applications, cover letters and résumés. Not exempt. Example 10: A corporation places Internet cookies onto customers' devices that gather search information used to adjust production schedules and inventory, develop new products, or identify new items to offer. Not exempt. Example 11: Same facts as example 10, except the cookies gather information used only for purposes entirely ancillary to solicitation (remembering cart contents, storing customer-provided information, reminding customers of previously considered products), and perform no other function. Exempt. Example 12: A corporation remotely fixes or upgrades previously purchased products by transmitting code via the Internet. Not exempt. Example 13: A corporation offers and sells extended warranty plans through its website to New York customers. Not exempt. Example 14: A corporation contracts with a marketplace provider that maintains inventory, including the corporation's products, at fulfillment centers in New York State. Not exempt. Example 15: A corporation that sells tangible personal property via the Internet also contracts with New York customers to stream videos and music for a fee. Streaming is not the sale of tangible personal property; not exempt. Example 16: A corporation offers for sale only tangible personal property on its website, which enables customers to search items, read descriptions, select items, choose delivery options, and pay, and engages in no other New York activities. Exempt.