**** SAMPLE LETTER RULING WCM CONTENT **** LR 7075

Nexus

March 29, 2012

Dear Applicant:

     This is a letter ruling issued by the Director of Revenue under Section 536.021.10, RSMo, and Missouri Code of State Regulations 12 CSR 10-1.020, in response to your letter dated February 9, 2012.

     The facts as presented in your letter ruling request and on your web site are summarized as follows:

Applicant is a company with headquarters outside Missouri that provides medical risk test kits to participating physicians. Applicant employs a sales representative in Missouri who maintains a supply of test kits and provides the test kits to physicians in Missouri. The sales representative's duties include helping gain expression of interest, promoting the test kits, and providing the test kits to participating physicians. Applicant maintains no other presence in Missouri.

Participating physicians use the test kits as part of their services to Missouri patients. The completed test kit is returned to Applicant's offices where, after documentation, it is then sent on to Applicant's parent company's labs for test processing and results. Once complete, the report is uploaded to a server and retrieved by the offices outside Missouri, which then forward the results to the requesting physician.

A third party claims processing service processes the invoice and follows up with the physicians, patient and patient's health care provider for payment.

ISSUE 1:

  Does Applicant have nexus in Missouri?

RESPONSE 1:

     Yes. Applicant has nexus for Missouri corporation income tax for any tax period under the facts provided.

     Missouri imposes the corporation income tax, subject to state and federal legislative limits, to the fullest extent constitutionally permissible. Applicant maintains a presence in the state of Missouri through an employee and inventory of the test kits. This presence creates nexus.

ISSUE 2:

     Does Applicant have sufficient presence or a certain level of activity within Missouri that makes them subject to income tax?

RESPONSE 2:

     Yes. Applicant has sufficient presence within Missouri to subject it to Missouri corporation income tax.

     Public Law 86-272, 15 U.S.C. 381-384 (P. L. 86-272) provides that a corporation is immune from state income tax if its activities in the state are limited to the solicitation of sales of tangible personal property by the corporation or its representatives. To be protected under P.L. 86-272, a corporation must do nothing within the state but invite orders. Orders must be sent outside the state for acceptance or rejection, and any shipment or delivery must be from points outside of state. Any in-state activity other than the solicitation of orders, actions ancillary to solicitation, or de minimis activities may cause the loss of the immunity afforded by P.L. 86-272. Ancillary activities are those that serve no independent business function for seller apart from their connection to the solicitation of orders. De minimis activities are those, when taken together, establish only a trivial connection with the state.

     Applicant employs personnel in Missouri whose activities exceed mere solicitation in that Applicant's employee delivers Applicant's test kits to in-state physicians. Applicant, through its employee, also maintains inventory in Missouri. Because these activities exceed those specified as solicitation or ancillary to solicitation, Applicant is outside the immunity provided by P.L. 86-272.

     Section 143.071, RSMo, imposes a tax on the Missouri taxable income of all corporations. Section 143.481, RSMo, requires a corporation to file a Missouri income tax return if it 1) is not exempt under Section 143.441.2; 2) is required to file a federal income tax return; and 3) has gross income from sources within Missouri of $100 or more.

     Applicant may choose to apportion its income using either the single factor method under Section 143.451, RSMo, or the three factor method under the Multistate Tax Compact, Section 32.200, RSMo.

     This letter ruling is binding upon the Department of Revenue with respect to the Applicant for three (3) years from the date of this letter and is subject only to statutory changes by the General Assembly and to changes in the interpretation of law by the courts or administrative tribunals. If a change occurs, the taxpayer who relies upon an outdated interpretation may be subject to additional taxes, interest and penalties, which may be imposed prospectively from the date of the change. For this reason, the interpretation set forth above should be reviewed on a regular basis. Please note that any change in or deviation from the facts as presented will render this ruling inapplicable.

     Should additional information be needed, please contact Associate Counsel Maria A. Sanders, General Counsel's Office, Post Office Box 475, Jefferson City, Missouri 65105-0475 (phone 573-751-0961), or me.

Sincerely,

Alana M. Barragán-Scott