NY TSB-A-93(2)C Corporation Tax 1993-01-11

Is a company whose only district activity beyond solicitation is maintaining an office subject to the metropolitan transportation business tax surcharge?

Short answer: Yes. A company that maintains an office in the metropolitan commuter transportation district (MCTD) is subject to the metropolitan transportation business tax surcharge under Tax Law section 209-B, even though its actual sales and leasing all occur in New Jersey and its other MCTD activities are limited to soliciting orders. Public Law 86-272 protects a corporation whose district activities are limited to soliciting orders for tangible personal property that are sent outside the MCTD for approval and filled from outside the MCTD -- but maintaining an office in the MCTD goes beyond mere solicitation, so the protection does not apply.

Disclaimer: This is an official New York State Department of Taxation and Finance Advisory Opinion (TSB-A), issued by the Office of Counsel at a taxpayer's request. It is limited to the facts set forth in it and binds the Department only with respect to the petitioner to whom it was issued, and only if that petitioner fully and accurately described all relevant facts; another taxpayer cannot rely on it. It reflects the law, regulations, and Department policy in effect when issued and may since have changed. Taxpayer-identifying details are redacted. New York State and local sales taxes are administered centrally by the Department. This summary is informational only and is not legal or tax advice. Consult a licensed New York tax professional about your specific situation.

About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked at the bottom of this page, or PDF in the sidebar) is the authoritative source for any reliance.

View original ruling (PDF)

Plain-English summary

Edgewood Industries, Inc. is in the computer leasing business. It maintains an office in the metropolitan commuter transportation district (MCTD), but all of its actual sales and leasing occur in New Jersey, and its activities within the MCTD are otherwise limited to soliciting orders -- orders sent to New Jersey for approval and filled from outside the MCTD. It asked whether it owes the metropolitan transportation business tax surcharge under Tax Law section 209-B.

Yes -- because it maintains an office in the district. Section 209-B imposes the surcharge on corporations subject to Article 9-A that do business, employ capital, own or lease property, or maintain an office in the MCTD. Public Law 86-272 can shield a corporation whose MCTD activities are limited to soliciting orders for tangible personal property (sent outside the MCTD for approval and filled from outside). But maintaining an office in the MCTD is an activity that goes beyond mere solicitation, so P.L. 86-272 does not protect Edgewood. Accordingly, for the year at issue, it is subject to the MTA business tax surcharge.

This is the same principle as the broader nexus rules, applied to the MCTD: solicitation alone can be protected, but keeping an office is a presence that defeats the protection.

What this means for you

An office defeats Public Law 86-272 protection

If your only district presence were solicitation, P.L. 86-272 might protect you; maintaining an office goes beyond solicitation and removes the shield -- here, for the MTA surcharge.

The MTA surcharge follows district presence

Section 209-B applies the surcharge to corporations that, among other things, maintain an office in the MCTD, regardless of where the sales happen.

Where the sales close does not control

Even though Edgewood's leasing all occurred in New Jersey, its New York-area office made it subject to the surcharge.

Common questions

Q: Our sales all happen outside the district, but we keep an office in it. Are we subject to the MTA surcharge?
A: Yes. Maintaining an office in the MCTD goes beyond mere solicitation, so Public Law 86-272 does not protect you and section 209-B applies.

Q: When would P.L. 86-272 protect us in the district?
A: When your MCTD activities are limited to soliciting orders for goods that are sent outside the district for approval and filled from outside it.

Q: Does it matter that our leasing all occurs in New Jersey?
A: No. The office in the MCTD is enough to make you subject to the surcharge.

Citations and references

Statutes, regulations, and authorities:
- Tax Law section 209-B (metropolitan transportation business tax surcharge)
- Public Authorities Law section 1262 (definition of the metropolitan commuter transportation district)
- Public Law 86-272 (15 U.S.C. sections 381-384)

Source

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-93 (2) C
Corporation Tax
January 11, 1993

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. C921021A

A Petition for Advisory Opinion was received from Edgewood Industries, Inc., 3 Forest Lane,
Scarsdale, New York 10583.
The issue raised by Petitioner, Edgewood Industries, Inc., is whether it is subject to the
metropolitan transportation business (hereinafter "MTB") tax surcharge for taxable year June 1, 1991
to May 31, 1992.
Petitioner is in the computer leasing business. Petitioner maintains an office in the
metropolitan commuter transportation district (hereinafter "MCTD") but all of its leasing business
takes place in New Jersey.
Petitioner's business consists of equipment sales and leasing all of which occurs in New
Jersey. Petitioner's activities in the MCTD are limited to solicitation of orders for sale or lease of
tangible personal property. The orders are sent outside the MCTD to New Jersey for approval or
rejection and, if approved, are filled by shipment or delivery from points outside the MCTD to points
outside the MCTD.
Section 209-B.1 of Article 9-A of the Tax Law, provides that the MTB tax surcharge is
imposed on every corporation, other than a New York S corporation, subject to tax under section 209
of the Tax Law for the privilege of exercising its corporate franchise, or of doing business, or of
employing capital, or of owning or leasing property in a corporate or organized capacity, or of
maintaining an office in the MCTD for all or any part of its taxable year.
Section 209-B.6 of the Tax Law provides that the term MCTD is defined pursuant to section
1262 of the Public Authorities Law. Such section 1262 provides that the MCTD includes the
counties of New York, Bronx, Queens, Kings, Richmond, Dutchess, Nassau, Orange, Putnam,
Rockland, Suffolk and Westchester.
Pursuant to Public Law 86-272 (15 USCA § 381-384) a foreign corporation is not subject
to the tax imposed by section 209-B of Article 9-A of the Tax Law if its activities within the MCTD
are limited to the solicitation of orders by the corporation's representatives or independent
contractors for sales of tangible personal property, which orders are sent outside the MCTD for
approval or rejection, and which if approved, are filled by shipment or delivery from a point outside
the MCTD.
However, herein Petitioner's maintenance of an office within the MCTD is an activity that
exceeds the mere solicitation of orders and therefore, Petitioner is not exempt from the MTB tax
surcharge by virtue of Public Law 86-272.
TP-9 (9/88)

-2
TSB-A-93 (2) C
Corporation Tax
January 11, 1993

Accordingly, for taxable year June 1, 1991 to May 31, 1992, Petitioner is subject to the
MTB tax surcharge pursuant to section 209-B of the Tax Law.

DATED: January 11, 1993

s/PAUL B. COBURN
Deputy Director
Taxpayer Services Division

NOTE: The opinions expressed in Advisory Opinions
are limited to the facts set forth therein.