Michigan Schedule of Business Activity Protected Under Public Law 86-272

Schedule of Business Activity Protected Under Public Law 86-272
4586, 2023 Michigan Business Tax Schedule of Business Activity Protected Under Public Law 86-272
Attachment 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.

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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.

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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.

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•	 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.