March 5, 1984

__________ ("Corporation") is a foreign corporation engaged in diverse enterprises, including the manufacture and sale of candy. The Corporation owns and operates a retail store in Massachusetts, but proposes to sell it.

You inquire whether the Corporation will be subject to the Massachusetts corporate excise after it sells the store.

The Corporation employs three full-time sales people who live in Massachusetts and who solicit sales in Massachusetts and other New England states. These employees operate out of their homes. Their sales are approved at the Corporation's home office in __________ and the goods they sell are delivered from locations outside Massachusetts.

The Corporation provides its Massachusetts sales people with automobiles owned by the Corporation. You state that in the future the Corporation may give these employees a transportation allowance for use of their own vehicles instead of providing them with company cars.

Every foreign corporation exercising its charter, or qualified to do business or actually doing business in Massachusetts, or owning or using any part or all of its capital, plant or any other property in Massachusetts, must pay the Massachusetts corporate excise (G.L. c. 63, § 39).

General Laws Chapter 63, Section 39 provides that:

"[t]he excise levied herein is due and payable on any one or all of the following alternative incidents:

(1) The qualification to carry on or do business in this state or the actual doing of business within the commonwealth in a corporate form. The term 'doing business' as used herein shall mean and include each and every act, power, right, privilege, or immunity exercised or enjoyed in the commonwealth, as an incident to or by virtue of the powers and privileges acquired by the nature of such organizations, as well as, the buying, selling or procuring of services or property.

(2) The exercising of a corporation's charter or the continuance of its charter within the commonwealth.

(3) The owning or using any part or all of its capital, plant or other property in the commonwealth in a corporate capacity.

It is the purpose of this section to require the payment of this excise to the commonwealth by foreign corporations for the enjoyment under the protection of the laws of the commonwealth, of the powers, rights, privileges and immunities derived by reason of the corporate form of existence and operation."

Federal law establishes a threshold of in-state corporate activity below which a foreign corporation may not be subjected to a state tax upon, or measured by, net income derived from interstate commerce. 15 U.S.C. Section 381(a) (1970) provides:

"No State...shall have power to impose...a net income tax on the income derived within such State by any person from interstate commerce if the only business activities within such State by or on behalf of such person during such taxable year are either, or both, of the following:

(1) the solicitation of orders by such person, or his representative, in such State for sales of tangible personal property, which orders are sent outside the State for approval or rejection, and, if approved, are filled by shipment or delivery from a point outside the State: and

(2) the solicitation of orders by such person, or his representative, in such State in the name of or for the benefit of a prospective customer of such person, if orders by such customer to such person to enable such customer to fill orders resulting from such solicitation are orders described in paragraph (1)."

Based on the foregoing, it is ruled that if the Corporation's Massachusetts sales people continue to use company cars after the Corporation sells its Massachusetts retail store, the Corporation will remain subject to the Massachusetts corporate excise. This ruling should not be construed as a determination whether the Corporation's activities will subject it to the corporate excise if it decides to discontinue use of its vehicles in Massachusetts.

Very truly yours,

/s/Ira A. Jackson
Commissioner of Revenue

IAJ:JXD:mf

LR 84-1