Every foreign corporation that does business, employs capital, owns or leases property in a corporate or organized capacity, or maintains an office in New York State (whether or not the corporation has been authorized by the Department of State) is subject to tax under Article 9-A of the Tax Law and TSB-A-10(8)C Corporation Tax June 25, 2010 must file a corporate tax return and pay the franchise tax imposed by that article.

Each corporation subject to tax under Article 9-A of the Tax Law computes a tax on four different measures: a tax measured by the entire net income base, a tax measured by the capital base, a tax measured by the minimum taxable income base, and a tax measured by the fixed dollar minimum.

The corporation pays the highest computed tax, plus a tax on the subsidiary capital base, if applicable. Tax Law § 210.1; see Pub-20 at 10.

However, an exception exists under Public Law 86-272, as described in Section 1-3.2(a)(3) of the Article 9-A Regulations. Foreign corporations are exempt from corporate franchise tax if their employees’ and representatives’ activity is “. . . limited to the solicitation of orders. The solicitation of orders includes offering tangible personal property for sale or pursuing offers for the purchase of tangible personal property and those ancillary activities, other than maintaining an office, that serve no independent business function apart from their connection to the solicitation of orders.” 20 NYCRR 1-3.4(b)(9)(iv). Approval or rejection of the orders must take place outside the state. 20 NYCRR 1-3.4(b)(9)(i).

In order to meet these criteria for exemption, Petitioner must satisfy three separate conditions.

First, the testing systems sold by Petitioner to New York customers must consist solely of tangible personal property.

Second, Petitioner must restrict its activity in New York to the solicitation of orders.

Finally, the orders Petitioner solicits in New York must be approved or rejected outside of New York State. If Petitioner’s sale of testing equipment to its customer in New York meets these conditions, Petitioner will not be subject to corporate franchise tax under Article 9-A.

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