Did a Florida-based employee performing online administrative duties create corporate income-tax nexus beyond Public Law 86-272 protection?

Plain-English summary

The out-of-state corporation had an employee living in Florida who performed online administrative work for operations elsewhere. The employee handled accreditation matters and did not solicit sales.

Florida ruled that the corporation had corporate income-tax nexus. Public Law 86-272 protects only limited solicitation of orders for tangible personal property, while the employee's administrative functions were unprotected business activity in the state.

The result did not depend on whether the employee claimed part of the Florida home as office space. The corporation had to file Florida corporate income-tax returns and remit tax due.

What this means for you

A single remote employee can create income-tax nexus when the work goes beyond protected sales solicitation. Review actual job duties, not merely titles, home-office deductions, or the absence of a formal company office.

Common questions

Did the employee solicit sales? No.

Why did nexus still exist? The employee performed administrative business functions from Florida.

Did a home-office claim matter? No.

Citations and references

• Fla. Stat. §§ 220.02 and 220.11, 15 U.S.C. § 381, and Fla. Admin. Code r. 12C-1.011, as quoted or discussed in the advisement.

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 10C1-009

Original ruling text

TAX: Corporate Income Tax
TAA NUMBER: 10C1-009
ISSUE: Request for Determination of Nexus
STATUTE CITES: Section 220.02(1), F.S.
RULE CITES: Rule 12C-1.011(1), F.A.C.
QUESTION:
Whether the Taxpayer’s business activities in Florida exceeded the scope of
activities protected by Public Law 86-272, thereby subjecting Taxpayer to Florida corporate
income tax?
ANSWER: Taxpayer’s activities in Florida exceed pure solicitation of sales and are sufficient to
create nexus for Florida corporate income tax purposes.

September 01, 2010
XXX
XXX
XXX
Re:

Request for Technical Assistance Advisement 10C1-009
Corporate Income Tax Nexus
XXX (“Taxpayer”)

Dear XXX:
This letter is in response to your letter of XXX, requesting a ruling as to whether the
taxpayer has nexus for purposes of Florida’s corporate income tax. This response
constitutes a Technical Assistance Advisement (“TAA”) under Chapter 12-11, Florida
Administrative Code, and is issued to you under the authority of section 213.22, Florida
Statutes.
FACTS AS PROVIDED BY THE TAXPAYER
Taxpayer began business in XXX and has developed into a XXX. Through its team of
XXX, XXX and XXX, Taxpayer provides a broad range of XXX at its XXX and XXX
offices.
Based on the information the Taxpayer provided in a Corporate Income Tax Nexus
Investigation Questionnaire, it was determined that Taxpayer has an employee present in
the state that performs functions other than the solicitation of sales within Florida, and
accordingly, there was sufficient nexus to file a corporate income tax return with Florida.
Subsequently, in a letter dated XXX, Taxpayer requested a Technical Assistance
Advisement regarding whether it has sufficient nexus with the State of Florida.
LEGAL AUTHORITY
Subsection 220.02(1), F.S., states, in part:
It is the intent of the Legislature in enacting this code to impose a tax upon
all corporations, organizations, associations, and other artificial entities
which derive from this state or from any other jurisdiction permanent and
inherent attributes not inherent in or available to natural persons, such as

Technical Assistance Advisement 10C1-009
Page 2

perpetual life, transferable ownership represented by shares or certificates,
and limited liability for all owners. . . . It is the intent of the Legislature to
subject such corporations and other entities to taxation hereunder for the
privilege of conducting business, deriving income, or existing within this
state. . . .
Rule 12C-1.011(1)(k) and (l), F.A.C., state in part:
(1) The following activities, notwithstanding others within the meaning of
taxable privileges described in s. 220.02, F.S., will be construed as
conducting business, earning or receiving income in this state, or constitute
those activities of a resident or citizen of this state for purposes of this tax,
and corporations participating therein are subject to taxation unless
exempted by the constitution or the laws of the United States or this state.
(k) Making sales that are approved in the state by "independent contractors"
who do not hold themselves out as engaged in selling, or soliciting orders
for the sale of more than one principal; or making sales through the use of
representatives in this state, when activities engaged in exceed those
protected by P.L. 86-272 (15 U.S.C. ss. 381-384), which is incorporated by
reference in Rule 12C-1.0511, F.A.C.
(l) Having employees that are present in the state and that perform functions
other than the solicitation of sales within Florida.
ISSUE PRESENTED
Whether Taxpayer’s business activities in Florida exceeded the scope of activities
protected by Public Law 86-272, thereby subjecting Taxpayer to Florida corporate income
tax?
DISCUSSION AND ANALYSIS
In subsection 220.02(1), F.S., the Florida Legislature expressed its intent to tax
corporations for the “privilege of conducting business, deriving income, or existing within”
Florida. Subsection 220.11(1), F.S., imposes the tax on corporations for exercising those
privileges.
Congress has directed that states may not impose taxes on income derived from “business
activities” in interstate commerce which are limited to the “solicitation of orders.” 15
U.S.C. Section 381. Section 381 provides in pertinent part:
(a) 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

Technical Assistance Advisement 10C1-009
Page 3

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 this 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).
15 U.S.C. Section 381 (1988) (codifying Section 101 of Pub. L. 86-272).
While P.L. 86-272 was designed to define a lower limit for the exercise of a state's power
to tax, Heublein, Inc. v. South Carolina Tax Comm., 409 U.S. 275, 280 (1972), ruled that
the statute does not define what is encompassed within the meaning of the term
“solicitation of orders.” As a result, states have been left to determine, on a case-by-case
basis, whether the activities of a particular corporation exceeded “solicitation of orders.”
Rule 12C-1.011, F.A.C., addresses nexus issues within the context of P.L. 86-272. Rule
12C-1.011(1), F.A.C., contains a list of “unprotected activities” that will subject a nonFlorida corporation to the income/franchise tax. Among the list of unprotected activities
are having employees that are present in the state that perform functions other than the
solicitation of sales within Florida.
In this case, the employee’s activities involve the performance of on-line administrative
duties for Taxpayer’s operations in XXX, XXX, from XXX, home. In your TAA request,
you stated that the employee did not solicit sales of any type and that she was responsible
for the accreditation of therapist’s in Pennsylvania. Taxpayer conducted activities that
exceed the solicitation of orders protected by P.L. 86-272. As a result, Taxpayer (through
its employees) was clearly doing business in Florida during the taxable year in question.
This is true regardless of whether the employee claims a portion of her home as “office
space.”
CONCLUSION
The taxpayer has nexus with Florida and should file Florida corporate income tax returns
and remit the tax due.
This response constitutes a Technical Assistance Advisement under s. 213.22, F.S., which
is binding on the Department only under the facts and circumstances described in the
request for this advice, as specified in s. 213.22, F.S. Our response is predicated on those
facts and the specific situation summarized above. You are advised that subsequent

Technical Assistance Advisement 10C1-009
Page 4

statutory or administrative rule changes or judicial interpretation of the statutes or rules
upon which this advice is based may subject similar future transactions to a different
treatment from that which is expressed in this response.
You are further advised that this response, your request and related backup are public
records under Chapter 119, F.S., and are subject to disclosure to the public under the
conditions of s. 213.22, F.S. Confidential information must be deleted before public
disclosure. In an effort to protect confidentiality, we request you provide the undersigned
with an edited copy of your request Technical Assistance Advisement, the backup material
and this response, deleting names, addresses and any other details which might lead to
identification of the taxpayer. Your response should be received by the Department within
15 days of the date of this letter.
Sincerely,
Jermane L. Wright, Esq., CPA, LLM
Senior Attorney
Technical Assistance and Dispute Resolution
JLW/tlg
Record ID: 87213