This issue came to the forefront in 1994 when the MTC
hearing officer, Alan Friedman, suggested in his report on
the revised MTC statement on P.L. 86-272 (after the US
Supreme Court decision in Wrigley) states should consider
delivery in the seller's own vehicle to be an unprotected
activity unless and until courts ruled to the contrary.
Virginia and Massachusetts adopted regulations to that
effect, and both were struck down by the high courts of
those states in litigation initiated by the National Private
Truck Council. COMMONWEALTH OF VIRGINIA, DEPARTMENT OF
TAXATION v. NATIONAL PRIVATE TRUCK COUNCIL., 253 Va 74 480
SE2d 500, 01/10/1997; NATIONAL PRIVATE TRUCK COUNCIL, INC.
v. COMMISSIONER OF REVENUE., 426 Mass 324 688 NE2d 936,
12/22/1997. These were both declaratory judgment
proceedings in which the courts ruled that the regulations
violated the federal law. The U.S. Supreme Court denied
certiorari in the Massachusetts case (Dkt No 97-1570, cert.
den. May 26. 1998). There is no NJ case on the issue that I
know of, and I can't find anything in the NJ statute,
regulations, rulings or cases that would support the
position that delivery in the seller's own truck removes
P.L. 86-272 protection.

I notice that Question 12 on Schedule N does appear to give
you an out -- it says, "Provide the nature of what the
taxpayer's business part is in transporting property." So I
think you can answer the question honestly without
subjecting yourself to a measured tax in NJ, despite the
general instruction. Attach a statement to the form
explaining that your company uses its vehicles in NJ only to
deliver tangible personal property from outside the state to
NJ customers to fill orders that are approved outside NJ.
You might also cite the NPTC cases. You may also want to
state affirmatively that you do not use your trucks in NJ to
backhaul either your own products (e.g., defective or
otherwise returned merchandise) or anyone else's. Picking
up defective products and giving credit for them may be
considered an activity that is not entirely ancillary to
solicitation (you might do it whether or not you had sales
personnel in the state) and therefore is not protected; see
Rev. Rul. 97-15, Tenn. Dept. of Revenue, June 2, 1997.
Also, there is a NY ruling that a company that derived 4
percent of its total NY gross income from backhauling goods
other than its delivered products was not protected (KPMG
Peat Marwick LLP (Advisory Opinion), TSB-A-97(8)C, March 27,
1997. So it may help to make clear that you are not doing
any of those things.

As you can see the big flurry of activity on this issue
happened in 1997, and it has been pretty quiet ever since as
far as I can see. Even Alan Friedman (who has long since
retired) says "I made a mistake on that one." I had a
conversation with someone at the NPTC about this a few years
ago, and that person said the issue had not come up
elsewhere but if it did, the Council would definitely take
it on. So if NJ comes after you, call the NPTC!

You will still be subject to the filing requirement and the
minimum tax or AMA. Delivery in your own trucks (and, of
course, the presence of sales representatives in the state
if you have them) gives you due process/commerce clause
nexus, which is all that is required for those assessments.
P.L. 86-272 protects only against taxes on or measured by
net income.

Katie in San Diego

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >

I have a question regarding the NJ Corporate schedule N that
you complete when you are stating that you are exempt from
income tax under PL 86-272.

From what I understand, you must complete and attach
schedule N to the return if claiming to be exempt from
income taxes due to lack of nexus. However, if you check yes
on any one of the boxes on schedule N, the instructions
state that you are subject to NJ income taxes. My question
has to do with schedule N's question #12 (I think) where it
says something to the effect of do you deliver goods in your
own trucks.

Delivering goods in your own truck does not necessarily
create nexus with a state, and I believe there is an actual
NJ court case that even backs that up. So, how does one
answer question #12 if you do deliver goods in your own
truck to NJ but don't have sufficient nexus with NJ
(remember the instructions state if you answer yes to any
question you are subject to NJ income tax)?

I guess they still nail you for the min tax or AMA.

Thanks for the insight.

Josh

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >