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Michigan Department of Treasury Attachment 01
4586 (Rev. 04-21), Page 1 of 2

2021 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.

Continue on Page 2.
+ 0000 2021 79 01 27 1

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2021 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 Tax Year

17. 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 2021 79 02 27 9

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4586, Page 3

Instructions for Form 4586, Michigan Business Tax (MBT)
Schedule of Business Activity Protected Under Public Law 86-272
Purpose establish only a trivial connection with the taxing state, and
those activities conducted by independent contractors) to be a
Generally, Public Law (PL) 86-272, 15 USC 381-384, restricts protected activity. Solicitation is limited to speech or conduct
a state from imposing a net income tax on income derived that explicitly or implicitly invites an order; and activities that
within its borders from interstate commerce if the only neither explicitly nor implicitly invite an order, but are entirely
business activity of the company within the state consists of ancillary to requests for an order.
the solicitation of orders for sales of tangible personal property,
which orders are to be sent outside the state for acceptance or Ancillary activities are those activities that serve no
rejection, and, if accepted, are filled by shipment or delivery independent business function for the seller apart from their
from a point outside the state. The term net income tax includes connection to the solicitation of orders. Activities that seek to
the business income tax component of the MBT, but does not promote sales are not ancillary, because PL 86-272 does not
include the modified gross receipts portion of the MBT. In protect activity that facilitates increased sales; it only protects
other words, even if a taxpayer has nexus with Michigan, that ancillary activities that facilitate the request for an order.
taxpayer may be protected from the imposition of the business Also, PL 86-272 provides protection to certain in-state
income tax under PL 86-272, but still be subject to the Modified activities if conducted by an independent contractor that would
Gross Receipts Tax. not be afforded if performed by the entity or its employees or
The purpose of this form is to provide data that helps the other representatives. Independent contractors may engage in
taxpayer and the Department of Treasury determine whether the following limited activities in Michigan without the entity’s
this restriction on state taxing power applies in this case. loss of immunity:
• Soliciting sales.
General Information
• Making sales.
PL 86-272 does not prohibit Michigan from asserting that • Maintaining an office.
an out-of-state business has nexus. Rather, implicit in the
application of PL 86-272 is that an out-of-state business has However, maintenance of a stock of goods in Michigan by the
nexus. PL 86- 272 merely prohibits the imposition of tax based independent contractor under consignment or any other type of
on net income generated from protected activities. As the arrangement with the entity, except for purposes of display and
Modified Gross Receipts Tax is not a tax on or measured by solicitation, removes the protection.
income, PL 86-272 offers no protection from this tax and all Sales representatives who represent a single principal are not
gross receipts are subject to the tax calculation. Nexus is a considered to be independent contractors and are subject to the
different concept than protection from taxation afforded by PL same limitations as those provided under PL 86-272.
86-272. As stated above, implicit in the application of PL 86-
272 is that an out-of-state business has nexus but the activity is Unprotected Activities
not subject to taxation because it is protected.
Entities are not protected under PL 86-272 if incorporated
NOTE: MBT has the same nexus standard for both the in the State of Michigan or, if individual, domiciled in, or a
Business Income Tax and Gross Receipts Tax. Substantial resident of, Michigan. Nor are entities protected if they solicit
nexus is established by either a physical presence in Michigan sales of services or property, other than tangible personal
for more than one day OR the taxpayer actively solicits and has property, in Michigan. PL 86-272 protection must be evaluated
gross receipts of $350,000 or more sourced to Michigan. on a tax year by tax year basis.
Only the solicitation to sell tangible personal property is afforded NOTE: PL 86-272 protection must be evaluated on a tax year
immunity under PL 86-272. Therefore, the leasing, renting, by tax year basis. If at any time during a tax year an entity
licensing, or other disposition of tangible personal property, or conducts activities that are not protected under PL 86-272, no
transactions involving intangibles, such as franchises, patents, income attributable to Michigan during any part of that tax
copyrights, trade marks, service marks, etc., or any other type of year will be protected.
property are not protected activities under PL 86-272.
Examine the following list of unprotected activities. Any of the
If an entity has employees in Michigan, this fact alone does not following activities conducted in Michigan by an out-of-state
preclude PL 86-272 protection. Employees, representatives, or taxpayer or on its behalf are not protected under PL 86-272:
independent contractors that are merely soliciting sales would
• Making repairs or providing maintenance or service to the
not preclude PL 86-272 protection. In fact employees may
property sold or to be sold.
have a home office, personal property such as fax machines,
computers, and automobiles in Michigan. If this personal • Collecting current or delinquent accounts through
property is only used to solicit sales or transfer information assignment or otherwise.
out-of-state for approval, then the activities are protected. • Investigating credit worthiness.
Under PL 86-272, the activity must be limited solely to • Installing or supervising installation.
solicitation (except for de minimis activities, those that • Conducting training courses, seminars or lectures for
personnel other than personnel involved only in solicitation.

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4586, Page 4

•  Providing any kind of technical assistance or service                orders outside Michigan for acceptance or rejection by the 
including, but not limited to, engineering assistance or design         out-of-state business, or for such other activities protected 
service, when one of the purposes thereof is other than the             under PL 86-272.
facilitation of the solicitation of orders of tangible personal         ○ Office  cannot  be  identified  in  a  telephone  listing  or 
property.                                                               other public listing within Michigan as a specific address 
• Investigating, handling, or otherwise assisting in resolving          for the out-of-state business or for an employee or 
customer complaints, other than mediating direct  customer              representative of the company in such capacity. 
complaints when  the  sole  purpose  of such mediation is for           ○  As an exception to the above, the normal distribution 
improving the relationship between the sales personnel and the          and use of business cards and stationery identifying the 
customer and facilitating requests for orders.                          employee’s or representative’s name, address, telephone 
•  Approving or accepting orders.                                       and  fax  numbers,  and  affiliation  with  the  out-of-state 
•  Repossessing property.                                               business shall not, by itself, be considered as advertising or 
                                                                        otherwise publicly attributing an office to the out-of-state 
•  Securing deposits on sales.
                                                                        business or its employee or representative.
•  Picking up or replacing damaged or returned property. 
                                                                        •  Entering into franchising or licensing agreements; selling 
•  Hiring, training, or supervising personnel, other than               or otherwise disposing of franchises and licenses; or selling 
personnel involved only in solicitation.                                or otherwise  transferring tangible personal property pursuant 
•  Using agency stock checks or any other instrument or process         to such franchise or license by the franchisor or licensor to its 
by which sales are made within Michigan by sales personnel.             franchisee or licensee in Michigan. 
•  Carrying samples for sale, exchange or distribution in any           •  Conducting any activity not protected under PL 86-272 that 
manner for consideration or other value.                                is not entirely ancillary to requests  for orders, even if such 
•  Owning, leasing, using or maintaining facilities or property         activity helps to increase sales.
in this State, including, but not limited to, the following:            NOTE: Protected activities are listed on the form.
  ○  Repair shop.
                                                                        Special Instructions for Unitary Business Groups
  ○  Parts department. 
                                                                        If  business  activity  is  protected  under  PL  86-272  for  any 
  ○ Any     kind  of  office  other  than  an  in-home  office  as      member of the unitary business group (UBG), then the member 
  permitted.                                                            must claim protection by filing the MBT Schedule of Business 
  ○  Warehouse.                                                         Activity for Non-Designated Members of a Unitary Business 
  ○ Meeting   place for directors, officers, or employees.              Group Protected Under Public Law 86-272      (Form 4581) 
                                                                        or the MBT Schedule of Business Activity Protected Under 
  ○  Stock of goods other than samples for sales personnel 
                                                                        Public Law 86-272 (Form 4586), as applicable, and report its 
  or that are used entirely ancillary to solicitation. 
                                                                        individual activity. If all members of the UBG are claiming PL 
  ○  Telephone answering service that is publicly attributed            86-272 protection, then the UBG will not calculate a business 
  to the entity or to employees or agents of the entity in their        income tax liability. So long as one member of a UBG has 
  representative status.                                                nexus with Michigan and exceeds the protections of PL 86-272, 
  ○  Mobile stores, i.e., vehicles with drivers who are sales           all members of the UBG – including members protected under 
  personnel making sales from the vehicles.                             PL 86-272 – must be included when calculating the UBG’s 
  ○ Real  property or fixtures to real property of any kind.            Business  Income  Tax  base  and  apportionment  formula.  (In 
                                                                        other words, PL 86-272 will only remove business income from 
•  Consigning stock of goods or other tangible personal property 
                                                                        the apportionable Business Income Tax base when all members 
for sale to any person, including an independent contractor. 
                                                                        of the UBG are protected under PL 86-272.) The inclusion of 
•  Maintaining in Michigan, by any employee or other                    the business income of members that fall under PL 86-272 in 
representative  of  the  out-of-state  business,  an  office  or  place the tax base of the UBG and the subsequent apportionment of 
of business of any kind, other than an in-home office located           such income does not constitute taxation upon those PL 86-
within the residence of the employee or representative.                 272 members. Rather, this method is required for properly 
The  maintenance  of  any  office  or  other  place  of  business  in   determining the Michigan income of the UBG.
Michigan  that  does  not  strictly  qualify  as  an  in-home  office 
as described below shall, by itself, cause the loss of protection       Include completed Form 4586 as part of the tax return filing.
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

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