Michigan Schedule of Business Activity Protected Under Public Law 86-272
Extracted from PDF file 2023-michigan-form-4586.pdf, last modified February 2024
Schedule of Business Activity Protected Under Public Law 86-272Attachment 01 Michigan Department of Treasury 4586 (Rev. 04-23), Page 1 of 2 2023 MICHIGAN Business Tax Schedule of Business Activity Protected Under Public Law 86-272 Issued under authority of Public Act 36 of 2007. Taxpayer Name Federal Employer Identification Number (FEIN) or TR Number Public Law (PL) 86-272, 15 USC 381-384, only affords protection from Business Income Tax when certain conditions are satisfied. It does not apply to the Modified Gross Receipts Tax. PL 86-272 restricts a state from imposing a tax on, or measured by, income derived within the state’s borders if the only business activity of the company within the state consists of the solicitation of orders for sale of tangible personal property. PL 86-272 does not prohibit Michigan from asserting that an out-of-state business has nexus. Implicit in the application of PL 86-272 is that an out-of-state business has nexus. PL 86-272 merely prohibits the imposition of tax based on net income generated from protected activities. PL 86-272 offers no protection from the Modified Gross Receipts Tax, therefore all gross receipts apportioned or allocated to Michigan are subject to the tax calculation. PL 86-272 protection must be evaluated on a tax year by tax year basis. If at any time during a tax year an entity conducts activities that are not protected under PL 86-272, no income attributable to Michigan during any part of that tax year will be protected. PART 1: PROTECTED ACTIVITIES The following activities conducted in Michigan by out-of-state businesses or on their behalf create nexus, subjecting the taxpayer to the Michigan Business Tax. However, PL 86-272 generally protects income generated from the sale of tangible personal property from the imposition of the income tax portion of the Michigan Business Tax in the following instances (check all that apply to your business in the current tax year): 1. Soliciting orders for sales by advertising. 2. Soliciting orders by an employee or representative of the entity so long as the individual does not, for the benefit of the entity, maintain or use any office or other place of business in Michigan other than an “in-home” office. 3. Carrying samples and promotional materials only for display or distribution without charge or other consideration. 4. Furnishing and setting up display racks and advising customers on display of the company’s products without charge or other consideration. 5. Providing automobiles to sales personnel for their use in conducting protected activities. 6. Passing orders, inquiries and complaints on to the home office. 7. Missionary sales activities; i.e., solicitation of indirect customers for the company’s goods. For example, a manufacturer’s solicitation of retailers to buy the manufacturer’s goods from the manufacturer’s wholesale customers is protected if such solicitation activities are otherwise protected. 8. Coordinating shipment or delivery without payment or other consideration and providing information relating thereto either prior or subsequent to the placement of an order. 9. Checking of customers’ inventories, without a charge for re-order (but not for other purposes, such as quality control). 10. Recruiting, training or evaluating sales personnel, including occasionally using homes, hotels or similar places for meetings with sales personnel. 11. Mediating customer complaints when the purpose is solely for improving the relationship between the sales personnel and the customer and facilitating requests for orders. 12. Owning, leasing, using or maintaining (i) personal property for use in the employee’s or representative’s “in-home” office, and/or (ii) an automobile that is solely limited to the conducting of protected activities. For example, the use of personal property such as a cellular telephone, facsimile machine, copier, personal computer and computer software will not subject the out-of-state business to the Business Income Tax so long as the use of these items is limited to the carrying on of protected solicitation. + 0000 2023 79 01 27 7 Continue on Page 2. 2023 Form 4586, Page 2 of 2 FEIN or TR Number PART 2: GENERAL INFORMATION Check all items that apply to your business. 13. Had a resident or nonresident employee working in Michigan during the tax year. 14. Had a resident or nonresident representative working in Michigan during the tax year. 15. Had a resident or nonresident independent contractor working in Michigan during the tax year. (Note: Sales activities by an independent contractor are provided additional protection under PL 86-272 not afforded to an employee or representative of a business.) 16. Previously filed Michigan tax returns for Sales, Use and Withholding Tax, Michigan Business Tax, or Single Business Tax. If checked, complete information below for the most recent return filed: Tax Type 17. Tax Year Had a regional office in Michigan during the tax year. If checked, enter office location below. PART 3: CERTIFICATION OF BUSINESS ACTIVITY PROTECTION UNDER PL 86-272 18. + By checking this box, I certify that I have reviewed the items listed above and that, to the best of my knowledge, the business activity of my business is protected under Public Law 86-272. I understand that further review of my business activity within Michigan by the Michigan Department of Treasury may result in a determination that my business is not protected under Public Law 86-272. I have reviewed the list of Unprotected Activities in the instructions and certify that the business does not conduct Unprotected Activities. 0000 2023 79 02 27 5 4586, Page 3 Instructions for Form 4586, Michigan Business Tax (MBT) Schedule of Business Activity Protected Under Public Law 86-272 Purpose Generally, Public Law (PL) 86-272, 15 USC 381-384, restricts a state from imposing a net income tax on income derived within its borders from interstate commerce if the only business activity of the company within the state consists of the solicitation of orders for sales of tangible personal property, which orders are to be sent outside the state for acceptance or rejection, and, if accepted, are filled by shipment or delivery from a point outside the state. The term net income tax includes the business income tax component of the MBT, but does not include the modified gross receipts portion of the MBT. In other words, even if a taxpayer has nexus with Michigan, that taxpayer may be protected from the imposition of the business income tax under PL 86-272, but still be subject to the Modified Gross Receipts Tax. The purpose of this form is to provide data that helps the taxpayer and the Department of Treasury determine whether this restriction on state taxing power applies in this case. General Information PL 86-272 does not prohibit Michigan from asserting that an out-of-state business has nexus. Rather, implicit in the application of PL 86-272 is that an out-of-state business has nexus. PL 86-272 merely prohibits the imposition of tax based on net income generated from protected activities. As the Modified Gross Receipts Tax is not a tax on or measured by income, PL 86-272 offers no protection from this tax and all gross receipts are subject to the tax calculation. Nexus is a different concept than protection from taxation afforded by PL 86-272. As stated above, implicit in the application of PL 86272 is that an out-of-state business has nexus but the activity is not subject to taxation because it is protected. NOTE: MBT has the same nexus standard for both the Business Income Tax and Gross Receipts Tax. Substantial nexus is established by either a physical presence in Michigan for more than one day OR the taxpayer actively solicits and has gross receipts of $350,000 or more sourced to Michigan. Only the solicitation to sell tangible personal property is afforded immunity under PL 86-272. Therefore, the leasing, renting, licensing, or other disposition of tangible personal property, or transactions involving intangibles, such as franchises, patents, copyrights, trade marks, service marks, etc., or any other type of property are not protected activities under PL 86-272. If an entity has employees in Michigan, this fact alone does not preclude PL 86-272 protection. Employees, representatives, or independent contractors that are merely soliciting sales would not preclude PL 86-272 protection. In fact employees may have a home office, personal property such as fax machines, computers, and automobiles in Michigan. If this personal property is only used to solicit sales or transfer information out-of-state for approval, then the activities are protected. Under PL 86-272, the activity must be limited solely to solicitation (except for de minimis activities, those that establish only a trivial connection with the taxing state, and those activities conducted by independent contractors) to be a protected activity. Solicitation is limited to speech or conduct that explicitly or implicitly invites an order; and activities that neither explicitly nor implicitly invite an order, but are entirely ancillary to requests for an order. Ancillary activities are those activities that serve no independent business function for the seller apart from their connection to the solicitation of orders. Activities that seek to promote sales are not ancillary, because PL 86-272 does not protect activity that facilitates increased sales; it only protects ancillary activities that facilitate the request for an order. Also, PL 86-272 provides protection to certain in-state activities if conducted by an independent contractor that would not be afforded if performed by the entity or its employees or other representatives. Independent contractors may engage in the following limited activities in Michigan without the entity’s loss of immunity: • Soliciting sales. • Making sales. • Maintaining an office. However, maintenance of a stock of goods in Michigan by the independent contractor under consignment or any other type of arrangement with the entity, except for purposes of display and solicitation, removes the protection. Sales representatives who represent a single principal are not considered to be independent contractors and are subject to the same limitations as those provided under PL 86-272. Unprotected Activities Entities are not protected under PL 86-272 if incorporated in the State of Michigan or, if individual, domiciled in, or a resident of, Michigan. Nor are entities protected if they solicit sales of services or property, other than tangible personal property, in Michigan. PL 86-272 protection must be evaluated on a tax year by tax year basis. NOTE: PL 86-272 protection must be evaluated on a tax year by tax year basis. If at any time during a tax year an entity conducts activities that are not protected under PL 86-272, no income attributable to Michigan during any part of that tax year will be protected. Examine the following list of unprotected activities. Any of the following activities conducted in Michigan by an out-of-state taxpayer or on its behalf are not protected under PL 86-272: • Making repairs or providing maintenance or service to the property sold or to be sold. • Collecting current or delinquent accounts through assignment or otherwise. • Investigating credit worthiness. • Installing or supervising installation. • Conducting training courses, seminars or lectures for personnel other than personnel involved only in solicitation. 4586, Page 4 • Providing any kind of technical assistance or service including, but not limited to, engineering assistance or design service, when one of the purposes thereof is other than the facilitation of the solicitation of orders of tangible personal property. • Investigating, handling, or otherwise assisting in resolving customer complaints, other than mediating direct customer complaints when the sole purpose of such mediation is for improving the relationship between the sales personnel and the customer and facilitating requests for orders. • Approving or accepting orders. • Repossessing property. • Securing deposits on sales. • Picking up or replacing damaged or returned property. • Hiring, training, or supervising personnel, other than personnel involved only in solicitation. • Using agency stock checks or any other instrument or process by which sales are made within Michigan by sales personnel. • Carrying samples for sale, exchange or distribution in any manner for consideration or other value. • Owning, leasing, using or maintaining facilities or property in this State, including, but not limited to, the following: ○ Repair shop. ○ Parts department. ○ Any kind of office other than an in-home office as permitted. ○ Warehouse. ○ Meeting place for directors, officers, or employees. ○ Stock of goods other than samples for sales personnel or that are used entirely ancillary to solicitation. ○ Telephone answering service that is publicly attributed to the entity or to employees or agents of the entity in their representative status. ○ Mobile stores, i.e., vehicles with drivers who are sales personnel making sales from the vehicles. ○ Real property or fixtures to real property of any kind. • Consigning stock of goods or other tangible personal property for sale to any person, including an independent contractor. • Maintaining in Michigan, by any employee or other representative of the out-of-state business, an office or place of business of any kind, other than an in-home office located within the residence of the employee or representative. The maintenance of any office or other place of business in Michigan that does not strictly qualify as an in-home office as described below shall, by itself, cause the loss of protection under PL 86-272. It is not relevant whether the out-of-state business pays directly, indirectly, or not at all for the cost of maintaining such an in-home office. To qualify as a protected in-home office, the following criteria apply: ○ Office cannot be publicly attributed to the out-of-state business or to the employee or representative of the out-of-state business in an employee or representative capacity. ○ Use of such office must be limited to soliciting and receiving orders from customers, for transmitting such orders outside Michigan for acceptance or rejection by the out-of-state business, or for such other activities protected under PL 86-272. ○ Office cannot be identified in a telephone listing or other public listing within Michigan as a specific address for the out-of-state business or for an employee or representative of the company in such capacity. ○ As an exception to the above, the normal distribution and use of business cards and stationery identifying the employee’s or representative’s name, address, telephone and fax numbers, and affiliation with the out-of-state business shall not, by itself, be considered as advertising or otherwise publicly attributing an office to the out-of-state business or its employee or representative. • Entering into franchising or licensing agreements; selling or otherwise disposing of franchises and licenses; or selling or otherwise transferring tangible personal property pursuant to such franchise or license by the franchisor or licensor to its franchisee or licensee in Michigan. • Conducting any activity not protected under PL 86-272 that is not entirely ancillary to requests for orders, even if such activity helps to increase sales. NOTE: Protected activities are listed on the form. Special Instructions for Unitary Business Groups If business activity is protected under PL 86-272 for any member of the unitary business group (UBG), then the member must claim protection by filing the MBT Schedule of Business Activity for Non-Designated Members of a Unitary Business Group Protected Under Public Law 86-272 (Form 4581) or the MBT Schedule of Business Activity Protected Under Public Law 86-272 (Form 4586), as applicable, and report its individual activity. If all members of the UBG are claiming PL 86-272 protection, then the UBG will not calculate a business income tax liability. So long as one member of a UBG has nexus with Michigan and exceeds the protections of PL 86‑272, all members of the UBG – including members protected under PL 86-272 – must be included when calculating the UBG’s Business Income Tax base and apportionment formula. (In other words, PL 86-272 will only remove business income from the apportionable Business Income Tax base when all members of the UBG are protected under PL 86-272.) The inclusion of the business income of members that fall under PL 86-272 in the tax base of the UBG and the subsequent apportionment of such income does not constitute taxation upon those PL 86272 members. Rather, this method is required for properly determining the Michigan income of the UBG. Include completed Form 4586 as part of the tax return filing.
4586, 2023 Michigan Business Tax Schedule of Business Activity Protected Under Public Law 86-272
More about the Michigan Form 4586 Corporate Income Tax TY 2023
We last updated the Schedule of Business Activity Protected Under Public Law 86-272 in February 2024, so this is the latest version of Form 4586, fully updated for tax year 2023. You can download or print current or past-year PDFs of Form 4586 directly from TaxFormFinder. You can print other Michigan tax forms here.
Other Michigan Corporate Income Tax Forms:
|E-file Authorization for Business Taxes MI-8879 (OBSOLETE)
|Annual Flow-Through Withholding Reconciliation Return (OBSOLETE)
|Form MI W-4P
|Withholding Certificate for Michigan Pension or Annuity Payments
|Penalty and Interest Computation for Underpaid Estimated Tax*
|Pension Continuation Schedule
Michigan usually releases forms for the current tax year between January and April. We last updated Michigan Form 4586 from the Department of Treasury in February 2024.
About the Corporate Income Tax
The IRS and most states require corporations to file an income tax return, with the exact filing requirements depending on the type of company.
Sole proprietorships or disregarded entities like LLCs are filed on Schedule C (or the state equivalent) of the owner's personal income tax return, flow-through entities like S Corporations or Partnerships are generally required to file an informational return equivilent to the IRS Form 1120S or Form 1065, and full corporations must file the equivalent of federal Form 1120 (and, unlike flow-through corporations, are often subject to a corporate tax liability).
Additional forms are available for a wide variety of specific entities and transactions including fiduciaries, nonprofits, and companies involved in other specific types of business.
Historical Past-Year Versions of Michigan Form 4586
We have a total of thirteen past-year versions of Form 4586 in the TaxFormFinder archives, including for the previous tax year. Download past year versions of this tax form as PDFs here:
4586, 2023 Michigan Business Tax Schedule of Business Activity Protected Under Public Law 86-272
4588, 2022 Michigan Business Tax Schedule of Business Activity Protected Under Public Law 86-272
4586, Michigan Business Tax Schedule of Business Activity Protected Under Public Law 86-272
4586, 2020 Michigan Business Tax Schedule of Business Activity Protected Under Public Law 86-272
4586, 2019 Michigan Business Tax Schedule of Business Activity Protected Under Public Law 86-272
4586, 2018 MICHIGAN Business Tax Schedule of Business Activity Protected Under Public Law 86-272
4586, 2017 Michigan Business Tax Schedule of Business Activity Protected Under Public Law 86-272
4586, 2016 Michigan Business Tax Schedule of Business Activity Protected Under Public Law 86-272
Form 4586, 2011 Michigan Business Tax Schedule of Business Activity Protected Under Public Law 86-272
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