Vanderbilt Law Review


Paul J. Hartman

First Page



In 1959, in response to pressure from multistate business and over the protest of state tax authorities and others, Congress passed Public Law 86-272 limiting the power of state and local governments to tax net income derived from interstate commerce.' The provisions of Public Law 86-272, briefly stated, prohibit state or local governments from imposing net income taxes on sellers of tangible personal property whose business activities in the state are limited to one or more of the following:. solicitation of orders for sales of tangible personal property by the seller or his own representative when the orders are sent outside the taxing state for approval or rejection and are filled by shipment or delivery from a point outside that state;. solicitation of orders for the sale of tangible personal property by the seller or his own representative for the benefit of a prospective customer of the business, which orders are sent out of the state for acceptance, and are filled from a point outside the taxing state;. sales or solicitation by "independent contractors" who represent more than one principal and who hold themselves out as"independent contractors" in the regular course of their business. In contrast to the permitted activities of the taxpayer itself, the independent contractor may complete a sale and maintain an office within the taxing state without subjecting the out-of-state seller to tax liability, so long as the independent contractor's activities on behalf of the taxpayer consist solely of making sales or soliciting orders for sales of tangible personal property. Judicial application of the "independent contractor" exemption, however, will not be analyzed in this article.