Question

Physical presence does not create an income tax nexus for sellers of tangible personal property if their activities in the state are limited to “protected” activities as described by Public Law 86-272.

Answer 1

As per Public Law 86-272, Under this the taxpayer may engage in certain protected activities without triggering the imposition of law. Generally these activities involve the solicitation of sales of tangible property that are accepted out of state and fulfilled with stocks located outside the state. But this protection is limited in its application to taxes measured by net income. Usually Taxpayers misinterpret provisions of law as providing some shield from the obligation to collect use tax. But this law is not applicable on taxes that are measured by gross receipts or sales.

Therefore physical presence, beyond some de minimis level, triggers an obligation to collect sales and use tax.