Question

HB Corp. is commercially domiciled in State C. HB has sales representative, Hal, in State B. Hal engages in the following activities: I. carries free samples II. drives around State B in his own car and checks in with customers III. makes minor repairs to previously sold items. Which of the above items exceeds the definition of solicitation under PL 86-272?

a. I only
b. II only
c. III only
d. I and III
e. II and III

Answer 1

Under PL 86-272, carrying samples and visiting customers to solicit orders are protected activities, but making repairs to previously sold items is not. Thus, the answer is 'c. III only', which refers to making minor repairs.

Step-by-step explanation:

The question relates to Public Law 86-272 (PL 86-272), which deals with the activities that do not allow a state to tax a company's income if the only business activity in the state is the solicitation of orders for sales of tangible personal property. Activities that usually qualify for this protection include carrying samples for presentation to customers (item I) and visiting customers in the state to solicit orders (item II). However, making minor repairs to previously sold items (item III) exceeds the definition of solicitation and would not be protected under PL 86-272, thus potentially subjecting the company to state income taxes.

Therefore, the answer to which activity exceeds the definition of solicitation under PL 86-272 is c. III only, pertaining to the making of minor repairs to previously sold items.