Which sales rep activities break P.L. 86-272 protection?

The Wrigley line, and the complaint-handling trap

Wrigley's usefulness is its concreteness. The Court sorted a real sales force's activities into protected and unprotected piles and explained each call. Protected: recruiting, training, and evaluating salespeople in the state and using homes and hotels for sales meetings, because all of it existed only to facilitate requests for orders. The Court's own illustration of an ancillary activity was providing a car and a stock of free samples to salespeople, because the only reason to do it is to facilitate requests for purchases. Unprotected, and each for its own reason: replacing stale product at no cost to the retailer, which the Court found the company would attend to whether or not it employed a sales force; filling retailers' new display racks from stock carried in the salesperson's car and billing the retailers for it through agency stock checks, which the Court held had a business purpose independent of solicitation because the retailers paid for the product; and storing product in the state, which served those two activities.

A recurring audit question is complaint handling, and Wrigley speaks to it directly. A salesperson who receives a customer's complaint and relays it, who gets the customer and the home office talking, is performing a mediating function that ingratiates the salesperson with the customer and would not be performed by anyone else if the sales force did not exist; that is ancillary to solicitation and protected. A salesperson who resolves the complaint, adjusts the invoice, authorizes the return, arranges the replacement, is doing customer service work the company would have to do through someone regardless, and that breaks protection. The questionnaire answer that says a rep handles complaints is therefore the beginning of the analysis, not the end: the operative question is conduit or cure. Wrigley itself decided only the conduit half: the regional sales manager who intervened two or three times a year in credit disputes, to get the customer and the company's credit department communicating, was engaged in an activity ancillary to solicitation. The cure half is the stated position of the agency lists, which treat investigating, handling, or otherwise assisting in resolving customer complaints, other than mediating direct complaints to ingratiate the salesperson with the customer, as beyond solicitation (Multistate Tax Commission, Statement of Information on Public Law 86-272, section IV.A.7 (rev. Aug. 4, 2021)).

Two recent state high court decisions apply the reason-to-do-it-anyway test to a sales force, and they confirm how little slack the line allows. In Uline, Inc. v. Commissioner of Revenue, No. A23-1561 (Minn. Aug. 7, 2024), the Minnesota Supreme Court held that sales representatives' company-mandated weekly reports of competitor and market information were not entirely ancillary to solicitation and, being regular and systematic, were not de minimis. And in Santa Fe Natural Tobacco Co. v. Department of Revenue, 372 Or 509 (2024), cert. denied (U.S. Dec. 16, 2024), the Oregon Supreme Court held that representatives' prebook orders, which wholesalers were contractually bound to accept, facilitated the sale rather than the solicitation and served an independent business function, while ordinary sell-sheet orders that left the retailer free to order or not remained protected solicitation; about thirteen prebooks a month, made as a matter of regular company policy, were not de minimis. Santa Fe applied the statute's second prong, which an analysis of distributor-channel sellers has to state: the law also protects missionary solicitation, meaning solicitation of orders in the state in the name of or for the benefit of a prospective customer, where that customer's own orders to the seller are sent out of state for approval and filled from outside the state (15 U.S.C. section 381(a)(2)).

The same logic sorts the rest of the recurring list. Approving orders in-state, collecting delinquent accounts, picking up returns, performing repairs or installation, conducting technical (as opposed to sales) training, investigating a customer's creditworthiness (Multistate Tax Commission statement, section IV.A.3; 20 NYCRR 1-2.10(f)(2)), and maintaining an office all break protection, with one settled exception on the office: under the Commission's statement, a salesperson's in-home office does not defeat protection if the company does not publicly attribute the office to itself and the office is used only for protected activities (sections IV.A.18, IV.B.2). On the protected side sit passing orders, inquiries, and complaints on to the home office, coordinating delivery dates as part of the pitch, and checking a customer's inventory without charge for the purpose of writing the next order (sections IV.B.6, IV.B.8, IV.B.9; 20 NYCRR 1-2.10(d)(2)), though the inventory item is the Commission's view and not universal: New York lists taking inventory of the company's products for customers as an activity beyond solicitation (20 NYCRR 1-2.10(f)(4)).

The statute also draws its own line between employees and independent contractors. Sales or solicitation of orders of tangible personal property by an independent contractor, and an independent contractor's in-state office used solely for making sales or soliciting orders, do not by themselves defeat protection (15 U.S.C. section 381(c)). The definition is narrow: an independent contractor is an agent or broker engaged in selling, or soliciting orders for the sale of, tangible personal property for more than one principal and holding itself out as such in the regular course of its business activities (15 U.S.C. section 381(d)(1)). In the Multistate Tax Commission's view, a representative acting for a single principal is not an independent contractor, and an independent contractor's performance of unprotected activities on the seller's behalf, such as warranty work or accepting returns, removes protection (Statement of Information, Article V).

And an activity that looks small on paper can be structural: a sales rep who sells product directly out of a company vehicle at an event has made an in-state sale, not a solicitation, and unless that sale and any other unprotected activity are de minimis taken together, the Multistate Tax Commission's position is that protection is lost for the entire tax year (Statement of Information, section VII.D; 15 U.S.C. section 381(a), which tests the activities conducted during the taxable year).

What the statute never covered in the first place

Half the errors in this area are scope errors, so the boundaries are worth stating. The statute protects only sellers of tangible personal property; services, intangibles, and mixed transactions fall outside it, and a rep who solicits both goods and services is engaged in unprotected activity as to the services, which removes protection for the year unless the unprotected activity, taken together with any other, is de minimis. It restrains only taxes imposed on, or measured by, net income (15 U.S.C. section 383); it says nothing about sales and use tax collection, which is why the same sales force that keeps a company outside a state's income tax can simultaneously create a collection obligation there, a distinction covered from the sales tax side in the companion article on representative nexus. Gross receipts regimes and net-worth-based franchise taxes sit outside the protection in the taxing states' view, minimum and registration-type fees frequently survive it, and registering to do business does not by itself surrender it. Finally, the modern fight over internet activities, whether a website's chat function, cookies, or post-sale email support are the electronic equivalent of unprotected in-state activity, is a live controversy rather than settled law, but the shorthand that the courts threw the whole project out is wrong and leads planners to the wrong risk assessment. What fell in California fell on procedural grounds and nothing more: California's Technical Advice Memorandum 2022-01 and Publication 1050 were invalidated in December 2023 as underground regulations, a holding about guidance issued without rulemaking rather than about what the guidance said (American Catalog Mailers Association v. Franchise Tax Board, S.F. Super. Ct. No. CGC-22-601363, judgment entered Dec. 18, 2023). That judgment is final, no appeal was taken and the time to appeal has run, and the Franchise Tax Board has no Public Law 86-272 rulemaking in progress as of the date this article states the law, so the agency's published protected and unprotected lists currently lack force in California and the analysis there rests on the statute and Wrigley. The Multistate Tax Commission's 2021 statement itself has never been invalidated by any court. And where courts have reached the merits, the states have prevailed: New York's internet-activity regulation at 20 NYCRR 1-2.10 was upheld on the merits at the trial level in 2025 and affirmed by the Appellate Division, Third Department on May 7, 2026, the court holding that the challenger had not demonstrated that the regulation as written revokes franchise tax immunity in circumstances where Public Law 86-272 requires it, with the trial court's bar on retroactive application left undisturbed. Rulemaking and litigation continue across the states, and this library tracks that moving target on its Watchlist rather than restating it here as law; what no analysis should carry forward is the assumption that the internet-activities position was disposed of in the courts. What Wrigley settled remains the operative standard for the physical-presence activities it addressed: the request for purchases, and what is entirely ancillary to it, are protected; independent business functions are not.

The two-edged sword, and why breaking protection can pay

Protection is usually framed as a shield, but for a profitable company based in a throwback state the analysis runs both ways, and the direction of the money surprises people. A manufacturer shipping nationwide from California starts from a sales factor where receipts from goods shipped from a California office, warehouse, factory, or other place of storage to states in which the taxpayer is not taxable are thrown back into the California numerator and taxed at California rates (Rev. and Tax. Code section 25135(a)(2)(B)). Two refinements come before any computation. For taxable years beginning on or after January 1, 2011, there is no throwback if any member of the combined reporting group is taxable in the purchaser's state (Rev. and Tax. Code section 25135(b)). And taxable includes a state that has jurisdiction to subject the taxpayer to a net income tax whether or not the state in fact imposes one (Rev. and Tax. Code section 25122(b)). Every market state where the company's activities exceed Public Law 86-272 is a state where the company is taxable, which pulls those receipts out of the throwback and into states whose rates are frequently lower than California's, or whose returns show little income after their own apportionment; for an S corporation, the benefit runs mainly to the entity-level tax and to nonresident shareholders, since California taxes resident shareholders on their full share regardless of apportionment. The nexus study that documents unprotected activities in a dozen market states can therefore lower the total state tax bill materially, with the corresponding compliance cost of filing in those states, and can support refund claims for open prior years computed the same way. The planning discipline cuts in both directions and should be deliberate rather than accidental: a company that wants protection needs job descriptions, training, and expense-report review that keep the sales force inside solicitation; a company for which protection is expensive needs the unprotected activities documented, real, and datable, because a state asked to accept taxability, or a home state asked to accept the resulting factor relief, will test the facts as hard as a state asserting tax would. Either way, the evidence is the same file: what the salespeople do, in writing, before anyone asks.

Practice notes

The working method for any Public Law 86-272 review starts with the actual job descriptions and the questionnaire answers, and the interview goes past the checkboxes: an answer of handles complaints runs through conduit-or-cure before it decides anything, every activity gets sorted into Wrigley's categories with the would-they-do-it-anyway question, and the unprotected residue is then weighed together against the de minimis standard, not item by item. Dates matter, because protection is tested year by year and an activity that began mid-year changes that year's answer. The vehicle and inventory facts deserve particular attention: samples are protected, selling stock is not, and the difference is one transaction. The scope limits belong on the front page of the memo, no protection for sales tax collection, services, or gross receipts taxes, so nobody reads an income tax shield as broader than it is. And the economics come before any assumption about which side of the line the client wants to be on; the answer follows the rates and the throwback rules, not instinct. One watch item now sits above the whole framework: S. 3027, the Interstate Commerce Simplification Act of 2025, introduced October 22, 2025, would redefine solicitation of orders to include any business activity that facilitates the solicitation of orders even if that activity also serves some independently valuable business function apart from solicitation, which would legislate the would-they-do-it-anyway test out of existence. A provision on the same subject, titled Solicitation of orders defined, passed the House inside the 2025 budget reconciliation bill and was removed in the Senate; nothing is enacted, and Wrigley remains the law, but any analysis built on this framework should carry the watch. G&G State Tax Group provides Public Law 86-272 protection reviews and state tax nexus consulting alongside its state and local tax practice.