ACTIVE PRESENCE AND SOLICITATION PLUS STANDARDS IN CONNECTION WITH THE SALE OF TANGIBLE PERSONAL PROPERTY
In connection with the sale of tangible personal property, the test for nexus (sufficient contact to be subject to the Business Privilege Tax) will be administered in two steps: Active Presence will subject a taxpayer to at least the Gross Receipts portion of the tax; activity rising to the level of “solicitation plus” will result in the imposition of both the Gross Receipts and Net Income portions of the tax.
“Active presence” means purposeful, regular and continuous efforts in Philadelphia in the pursuit or profit or gain and the performance in Philadelphia of activities essential to those pursuits. Limited activities of a taxpayer’s sales force in Philadelphia, such as anticipating the needs and requirements of the customer and following up regarding any difficulties the customer may have after delivery, may be sufficient nexus to sustain the levy of this tax. This is true as long as sales force physically performs some activities in Philadelphia, even if the taxpayer’s sales force does not take any sales orders from its customers in the City and all orders are made, paid, and fulfilled outside the City. Active presence is deemed to exist to the extent that the activities of the sales force in the City make possible the realization and continuance of valuable contractual relations between the taxpayer and its customers in the City. The maintenance of an office or property in the City is not necessary to establish “active presence”. Any person who is otherwise subject to the Business Privilege Tax under the “active presence” test but whose business activities in Philadelphia are limited to mere “solicitation” shall not be subject to the net income portion of the tax.
The following are examples of activities that meet the “Active Presence” standard:
Having agents, representatives, independent contractors, brokers or others, acting on behalf of an out-of-Philadelphia business own, rent, lease, use or maintain an office or other establishment in Philadelphia, when such establishment is used in the representation of the out-of-Philadelphia business in Philadelphia and is significantly associated with its ability to establish and maintain a marker in Philadelphia;
Having employees own, rent, lease, use, or maintain an office or in-home office or other establishment in Philadelphia, even if the business does not pay (directly or indirectly) for the use of the property;
Having independent contractors or representatives with in-home offices in Philadelphia, where the business reimburses the independent contractors or representatives only for telephone or travel expenses.
When the business activities of a taxpayer in Philadelphia exceed solicitation, the taxpayer is subject to both the gross receipts and the net income portion of the tax. For example, obtaining sales through salespersons who solicit orders on the business’s behalf and/or displaying the business’s merchandise in leased space on a prolonged or recurring basis is deemed to exceed “solicitation” and would subject the business to both the gross receipts and the net income portion of the tax.
For the purpose of this tax, solicitation means (1) speech or conduct that explicitly or implicitly invites an order; and (2) activities that neither explicitly nor implicitly invite an order, but are