(a) Apportionment of net income authorized — Arkansas Code § 26-51-702.

1. (1) If a taxpayer's business activities occur both within and outside of Arkansas, the taxpayer shall apportion its business income and allocate any nonbusiness income to Arkansas as provided by Arkansas law.
2. (2) "Taxpayer" means any corporation, partnership, firm, association, or person acting as a business entity in more than one (1) state.
3. (3) See Arkansas Code § 26-5-101, Art. II(3).

(c) Nature of property being sold — Arkansas Code § 26-51-702.

1. (1) Only the solicitation to sell tangible personal property is afforded protection under 15 U.S.C. § 381.
2. (2) Therefore, the leasing, renting, licensing, or other disposition of tangible personal property, or transactions involving intangibles, such as franchises, patents, copyrights, trademarks, service marks, and the like, or any other type of property, are not protected activities under 15 U.S.C. § 381.

(d) Solicitation of orders — Arkansas Code § 26-51-702.

1. (1) For in-state activity to be protected under 15 U.S.C. § 381, it must be limited solely to the solicitation of orders that, if approved, will be filled by shipment or delivery from a point outside of Arkansas.
2. (2) Ancillary activities described in subsection (e) of this section, de minimis activities described in subsection (f) of this section, and those activities conducted by independent contractors described in subsection (g) of this section are protected activities that, by themselves, will not establish nexus.

3. (3) "Solicitation" means:

   1. (A) Speech or conduct that explicitly or implicitly invites an order; and
   2. (B) Activities that neither explicitly nor implicitly invite an order, but are entirely ancillary (that is, related) to requests for an order.

(e) Ancillary activities — Arkansas Code § 26-51-702.

1. (1) Ancillary activities are those activities that serve no independent business function for the seller apart from their connection to the solicitation of orders.
2. (2) Ancillary activities are related solely to the solicitation of orders.
3. (3) Activities that a seller engages in apart from soliciting orders shall not be considered as ancillary to the solicitation of orders.
4. (4) The mere assignment of certain activities to sales personnel does not, merely by such assignment, make such activities ancillary to the solicitation of orders.

5. (5)

   1. (A) Activities that seek to promote sales, such as some marketing activities, are not ancillary, as 15 U.S.C. § 381 does not protect activity that facilitates sales.
   2. (B) 15 U.S.C. § 381 only protects ancillary activities that facilitate the request for an order.
6. (6) Engaging in activities that do not fall within the foregoing definition of solicitation will cause the taxpayer to lose the protection afforded by 15 U.S.C. § 381 unless the disqualifying activities, taken together, are de minimis as described in subsection (f) of this section.

(f) De minimis activities — Arkansas Code § 26-51-702.

1. (1) De minimis activities are those activities that, when taken together, establish only a trivial or minor connection with Arkansas.
2. (2) An activity conducted within Arkansas on a regular or systematic basis or pursuant to a company policy, whether such policy is in writing or not, will not be considered trivial.

3. (3)

   1. (A) Whether or not an activity establishes a trivial or nontrivial connection with Arkansas is to be measured on both a qualitative and quantitative basis.
   2. (B) If such activity either qualitatively or quantitatively creates a nontrivial connection with Arkansas, then such activity exceeds the protection of 15 U.S.C. § 381.
4. (4) Establishing that the disqualifying activities account for only a relatively small part of the business conducted within Arkansas or that the economic importance of such activities is minimal will not be determinative of whether a de minimis level of activity exists.

(g) Independent contractors — Arkansas Code § 26-51-702.

1. (1) 15 U.S.C. § 381 provides protection to certain in-state activities if conducted by an independent contractor that would not be afforded if performed by the taxpayer or its employees or other representatives.

2. (2) Independent contractors may engage in the following limited activities in Arkansas without the taxpayer's loss of protection:

   1. (A) Soliciting sales;
   2. (B) Making sales; or
   3. (C) Maintaining an office.

3. (3) Sales representatives who represent a single principal are:

   1. (A) Not considered to be independent contractors; and
   2. (B) Subject to the same limitations as those provided under 15 U.S.C. § 381 and this part.
4. (4) Maintenance of a stock of goods in Arkansas by an independent contractor under consignment or any other type of holding arrangement with the taxpayer will remove the protection unless such stock is used only for purposes of display and solicitation.

(h) Unprotected and protected activities — Arkansas Code § 26-51-702.

1. (1) Examples of activities presently considered by the Department of Finance and Administration to be either protected or unprotected are as follows.

2. (2) Unprotected activities. The following in-state activities, assuming they are not of a de minimis level, are not considered to be solicitation of orders or ancillary thereto or otherwise protected under 15 U.S.C. § 381 and will cause otherwise protected sales to establish nexus:

   1. (A) Making repairs or providing maintenance or service to the property sold or to be sold;
   2. (B) Collecting current or delinquent accounts, whether directly or by third parties, through assignment or otherwise;
   3. (C) Investigating credit worthiness;
   4. (D) Installation or supervision of installation after shipment and delivery;
   5. (E) Conducting training courses, seminars, or lectures for people other than those involved only in solicitation;
   6. (F) Providing any kind of technical assistance or service including, but not limited to, engineering assistance or design service, when one (1) of the purposes thereof is other than the facilitation of the solicitation of orders;
   7. (G) Investigating, handling, or otherwise assisting in resolving customer complaints;
   8. (H) Approving or accepting orders;
   9. (I) Repossessing property;
   10. (J) Securing deposits on sales;
   11. (K) Picking up or replacing damaged or returned property;
   12. (L) Hiring, training, or supervising personnel, other than personnel involved only in solicitation;
   13. (M) Using agency stock checks or any other similar instruments or processes by which sales are made within Arkansas by sales personnel;
   14. (N) Maintaining a sample or display room in excess of two (2) weeks (fourteen (14) days) at any one (1) location within Arkansas during the tax year;
   15. (O) Carrying samples for sale or for distribution in any manner in exchange for valuable consideration;
   16. (P) Owning, leasing, using, or maintaining any of the following facilities or property within Arkansas:

(i) Repair shop;

1. (ii) Parts department;

   1. (iii) Any kind of office other than an in-home office as described and permitted under subdivisions (h)(2)(R) and (h)(3)(B) of this section;

      1. (iv) Warehouse;
      2. (v) Meeting place for the taxpayer's:

(b) (b) Officers; or

1. (c) (c) Employees;

   1. (vi) Stock of goods other than samples for sales personnel or that are used entirely ancillary to solicitation;

      1. (vii)

(b) (b) For example, a listing in a telephone directory would constitute a public attribution;

1. (viii) Mobile stores, such as vehicles with drivers who are sales personnel making sales from the vehicles; or

   1. (ix) Real property or fixtures to real property of any kind;
   2. (Q) Consigning a stock or inventory of goods or other tangible personal property to any person, including an independent contractor, for sale to customers;

   3. (R)

      1. (i) Maintaining, by any employee or other representative, an office or place of business of any kind.
      2. (ii) However, an in-home office will not cause a loss of protection if:

(b) (b) Such an office is not publicly attributed to the taxpayer or to the employee or representative of the taxpayer in an employee or representative capacity; and

1. (c) (c) The use of such office is limited to:
2. (1) (1) Soliciting and receiving orders from customers;
3. (2) (2) Transmitting such orders outside of Arkansas for acceptance or rejection by the taxpayer; and

4. (3) (3) Such other activities that are protected under 15 U.S.C. § 381 or under subdivision (h)(3) of this section.

   1. (iii) A telephone listing or other public listing within the state for the taxpayer or for an employee or representative of the taxpayer in such capacity or other indications through advertising or business literature that the taxpayer or its employees or representative can be contacted at a specific address within Arkansas shall normally be determined as the taxpayer maintaining within Arkansas an office or place of business attributable to the taxpayer or to its employee or representative in a representative capacity.

      1. (iv) However, 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 taxpayer shall not, by themselves, be considered as advertising or otherwise publicly attributing an office to the taxpayer or its employee or representative.
      2. (v) The maintenance of any office or other place of business in Arkansas that does not strictly qualify as an in-home office as described above shall, by itself, cause the loss of protection under this part.
      3. (vi) For the purpose of this part, it is not relevant whether the taxpayer pays directly, indirectly, or not at all for the cost of maintaining such in-home office;
   2. (S) 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 within Arkansas;
   3. (T) Shipping or delivering goods into Arkansas by means of private vehicle, rail, water, air, or other carrier, regardless of whether a shipment or delivery fee or other charge is imposed, directly or indirectly, upon the purchaser; or
   4. (U) Conducting any activity in Arkansas not listed in subdivision (h)(3) of this section, below, that is not entirely ancillary to requests for orders, even if such activity helps to increase purchases (such as some marketing and promotional activities).

5. (3) Protected activities. The following in-state activities will not cause the loss of protection for otherwise protected sales:

   1. (A)

      1. (i) Soliciting orders for sales by any type of advertising.
      2. (ii) However, other marketing and promotional activities conducted within Arkansas can cause a loss of protection;
   2. (B) Soliciting of orders by an Arkansas resident employee or representative of the taxpayer, so long as such person does not maintain or use any office or other place of business in Arkansas other than an in-home office as described in subdivision (h)(2)(R) of this section, above;
   3. (C) Carrying samples and promotional material only for display or for distribution without charge or other valuable consideration;
   4. (D) Furnishing and setting up display racks and advising customers on the display of the taxpayer's products without charge or other valuable consideration;
   5. (E) Providing automobiles to sales personnel for their use in conducting protected activities;
   6. (F) Passing orders, inquiries, and complaints on to the home office;

   7. (G)

      1. (i) Missionary sales activities, which is the solicitation of indirect customers for the taxpayer's goods.
      2. (ii) For example, a manufacturer's solicitation of retailers to buy the manufacturer's goods from the manufacturer's wholesale customers would be protected if such solicitation activities are otherwise protected;
   8. (H) Coordinating shipment or delivery without payment or other valuable consideration and providing information relating thereto either prior or subsequent to the placement of an order;
   9. (I) Checking of customers' inventories without a charge therefor (for reorder, but not for other purposes such as quality control);
   10. (J) Maintaining a sample or display room for two (2) weeks (fourteen (14) days) or less at any one (1) location within Arkansas during the tax year;
   11. (K) Recruiting, training, or evaluating sales personnel, including occasionally using homes, hotels, or similar places for meetings with sales personnel; or

   12. (L)

       1. (i) Owning, leasing, using, or maintaining personal property for use in the employee’s or representative's in-home office or automobile, where the use of such personal property is solely limited to the conducting of protected activities.
       2. (ii) As such, the use of personal property such as a cellular telephone, facsimile machine, duplicating equipment, personal computer, and computer software in an in-home office or automobile that is strictly limited to the conducting of protected solicitation or activities entirely ancillary to such solicitation would be protected.
       3. (i) Application to corporation incorporated in Arkansas — Arkansas Code § 26-51-702.
6. (1) The protection afforded by 15 U.S.C. § 381 does not apply to any corporation incorporated by the Secretary of State.
7. (2) See the Arkansas Business Corporation Act of 1987, Arkansas Code § 4-27-101 et seq.

(j) Registration or qualification to do business — Arkansas Code § 26-51-702.

1. (1) A taxpayer that registers or otherwise formally qualifies to do business within Arkansas does not, by that fact alone, lose its protection under 15 U.S.C. § 381.
2. (2) However, if the taxpayer engages in activities within Arkansas that are not protected under 15 U.S.C. § 381, such protection will be lost.
3. (3) See Arkansas Code § 4-27-1501 et seq., of the Arkansas Business Corporation Act of 1987, Arkansas Code § 4-27-101 et seq.

(k) Loss of protection for conducting unprotected activity during part of the tax year.

1. (1) The protection afforded under 15 U.S.C. § 381 will be determined on tax-year-by-tax-year basis.
2. (2) Therefore, if at any time during a tax year the taxpayer conducts activities within Arkansas that are not protected under 15 U.S.C. § 381, all income earned by the taxpayer attributable to Arkansas during such tax year will be subject to Arkansas income tax.