§ 11-04 Corporations Not Subject to Tax.
(§ 11-603(4), Administrative Code.)
(a) A corporation which is subject to any of the following taxes is not subject to the general tax under Subchapter 2 of Chapter 6 of Title 11 of the Administrative Code;
(1) the tax on banking corporations imposed by Part 4 of Subchapter 3 of Chapter 6 of Title 11 of the Administrative Code;
(2) the tax on utilities, imposed by Chapter 11 of Title 11 of the Administrative Code, except that any corporation, other than a utility corporation subject to the supervision of the New York State Department of Public Service, which is subject to the utility tax under Chapter 11 of Title 11 as a vendor of utility services shall be subject to the general corporation tax imposed by Subchapter 2 of Chapter 6 of Title 11, in the manner described in § 11-603(4).
(b) The following corporations are also exempt from the general corporation tax:
(1) any trust company organized under a law of New York State, all of the stock of which is owned by not less than 20 savings banks organized under a law of New York State;
(2) bank holding companies filing a combined return in accordance with § 11-646(f), Administrative Code;
(3) an insurance corporation as defined in former § R46-41.0.4, Administrative Code (Repealed);
(4) limited-profit housing companies organized pursuant to Article 2 of the Private Housing Finance Law;
(5) housing development fund companies organized pursuant to the provisions of Article 11 of the Private Housing Finance Law;
(6) organizations described in paragraph 2 or 25 of subsection (c) of § 501 of the Internal Revenue Code.
(7) a corporation principally engaged in the operation of marine vessels whose activities in New York City are limited exclusively to the use of property in interstate or foreign commerce, provided, however, such a corporation will not be subject to the general corporation tax solely because it maintains an office in the City, or employs capital in the City in connection with such use of property;
(8) corporations, including but not limited to corporations organized under the New York Not-For-Profit Corporations Law or the New York Religious Corporations Law, organized and operated for nonprofit purposes and not engaged in substantial commercial activities, which are not authorized to issue stock or shares or certificates for stock or shares, and no part of the net earnings of which insures to the benefit of any officer, director or member. Absent substantial evidence to the contrary;
(i) a nonstock corporation described above that has been determined to be exempt by the Internal Revenue Service from Federal income taxation pursuant to subsection (a) of section 501 of the Internal Revenue Code will be presumed to be exempt from the general corporation tax; and
(ii) a corporation denied an exemption from Federal income tax under Section 501 of the Internal Revenue Code will be presumed to be not organized and operated for non-profit purposes,
(9) an Industrial Development Agency created pursuant to Article 18-A of the General Municipal Law.
(10) an entity that is treated for Federal income tax purposes as a real estate mortgage investment conduit (REMIC);
(11) foreign corporations that are exempt pursuant to the provisions of Public Law 86-272 (15 U.S.C. §§ 381 - 384).
(i) Public Law 86-272 prohibits New York State and its political subdivisions including New York City from imposing taxes on or measured by net income on income derived within the State from interstate commerce by a foreign corporation if the activities of the corporation in New York State are limited to either or both of the following:
(A) the solicitation of orders by employees or representatives in New York State for sales of tangible personal property, where the orders are sent outside New York State for approval or rejection, and, if approved, are filled by shipment or delivery from a point outside New York State, and
(B) the solicitation of orders for sales of tangible personal property by employees or representatives in New York State in the name of or for the benefit of a prospective customer of such corporation, if the customer's orders to the corporation are sent outside New York State for approval or rejection, and, if approved, are filled by shipment or delivery from a point outside New York State. The applicability of Public Law 86-272 to taxes imposed by New York City is determined by the nature of the corporation's activities in the entire State. Therefore, if a corporation's activities in New York City are limited to solicitation as described above and the corporation has no other activities in the State or its activities in the State are limited to the solicitation of orders in the State as described above, the corporation will not be subject to the general corporation tax. However, if in addition to sales solicitation activities in New York City, a foreign corporation carries on other activities in New York State sufficient to take it outside the scope of Public Law 86-272 for purposes of taxes imposed by New York State, Public Law 86-272 will not exempt the corporation from the general corporation tax.
(ii) For purposes of this paragraph 11, if a foreign corporation engages in no other activities in New York State, the corporation will not be considered to have engaged in taxable activities in New York City during the taxable year merely by reason of sales in New York City or the solicitation of orders for sales in New York City, of tangible personal property on behalf of the corporation by one or more independent contractors. Such foreign corporation will not be considered to have engaged in taxable activities in New York City by reason of the maintenance of an office in the City by one or more independent contractors whose activities on behalf of the corporation in the City consist solely of making sales, or soliciting orders for sales, of tangible personal property.
(iii) The term "independent contractor" means a commission agent, broker, or other independent contractor who is engaged in selling, or soliciting orders for the sale of tangible personal property for more than one principal and who holds himself of herself out as such in the regular course of his or her business activities. The term "representative" does not include an independent contractor.
(iv) In order for a foreign corporation to be exempt from the general corporation tax by virtue of Public Law 86-272, the activities in New York State of employees or representatives must be limited to the solicitation of orders. The solicitation of orders includes offering tangible personal property and those ancillary activities, other than maintaining an office, that serve no independent business function apart from their connection to the solicitation of orders. Activities that are entirely ancillary to the solicitation of orders include:
(A) the use of free samples and other promotional materials in connection with the solicitation of orders;
(B) passing product inquiries and complaints to the corporations home office;
(C) using automobiles furnished by the corporation;
(D) advising customers on the display of the corporation's products and furnishing and setting up display racks;
(E) recruitment, training and evaluation of sales representatives;
(F) use of hotels and homes for sales-related meetings;
(G) occasional instances of intervention in credit disputes;
(H) use of space at the salesperson's home solely for the salesperson's convenience. (However, see subparagraph (vi) of this paragraph as to loss of exemption for maintaining an office:)
(I) participating in a trade show or shows provided that such participation is for not more than 14 days, or parts thereof, in the aggregate during the corporation's taxable year for Federal income tax purposes. (However, see subparagraph (vi) of this paragraph as to loss of exemption for maintaining an office.)
(v) Activities in New York State beyond the solicitation of orders will result in the loss of exemption unless such activities are de minimis. Activities will not be considered de minimis if such activities establish a nontrivial additional connection with New York State. Solicitation does not include those activities that the corporation would have reason to engage in apart from a desire to solicit orders but chooses to allocate to its in-State sales force. Activities that go beyond the solicitation of orders include but are not limited to:
(A) making repairs to or installing the corporation's products;
(B) making credit investigations;
(C) collecting delinquent accounts;
(D) taking inventory of the corporation's products for customers or prospective customer's;
(E) replacing the corporation's stale or damaged products;
(F) giving technical advice on the use of the corporation's products.
(vi) Maintaining an office, shop, warehouse, or stock of goods in New York State will result in the loss of exemption. However, a corporation will not be taxable solely because it maintains a supply of goods in New York State if such goods are used only as free samples in connection with the solicitation of orders. A corporation will be considered to be maintaining an office in New York State if the space is held out to the public as an office or place of business of the taxpayer. For example, a salesperson uses his or her house for business. A telephone, listed in the corporation's name, is maintained at the salesperson's house. The salesperson makes telephone contacts from the house or receives calls and orders at the house. The residence will be treated as an office of the corporation.
(c) (1) A corporation will not be deemed to be doing business, employing capital, owning or leasing property in a corporate or organized capacity or maintaining an office in New York City because of:
(i) the maintenance of cash balances with banks or trust companies or brokers in New York City;
(ii) the ownership of shares of stock or securities kept in New York City in a safe deposit box, safe, vault or other receptacle rented for this purpose, or pledged as collateral security, or deposited in safekeeping or custody accounts with one or more banks or trust companies, or brokers who are members of a recognized security exchange;
(iii) the taking of any action by any such bank or trust company or broker, that is incidental to the rendering of safekeeping or custodian service to such corporation;
(iv) the maintenance of an office in the City by one or more officers or directors of the corporation who are not employees of the corporation, if the corporation is not otherwise doing business or employing capital in New York City and does not own or lease property in New York City;
(v) the keeping of books or records of a corporation in New York City, if such books or records are not kept by employees of such corporation and such corporation does not otherwise do business, employ capital, own or lease property, or maintain an office in New York City;
(vi) the participation in a trade show or shows, regardless of whether the corporation has employees or other staff present at such trade shows, provided the corporation's activity at the trade show is limited to displaying goods or promoting services, no sales are made, any orders received are sent outside New York State for acceptance or rejection and are filled from outside the state, and provided that such participation is for not more than 14 days, or parts thereof, in the aggregate during the corporation's taxable year for Federal income tax purposes; or
(vii) any combination of the foregoing activities.
(2) In addition, a corporation will not be subject to the general corporation tax if its sole connection with New York City is:
(i) the maintenance of a statutory office at the address of its registered agent of the maintenance of a mailing address; or
(ii) the mere ownership of shares of stock of corporations doing business in the City.
(3) Effective for taxable years beginning on or after January 1, 1998, an alien corporation, as defined in § 11-603(2-a) of the Administrative Code, will not be deemed to be doing business, employing capital, owning or leasing property, or maintaining an office in New York City if its activities in the City are limited solely to investing or trading, for its own account, in (a) stocks and securities within the meaning of § 864(b)(2)(A)(ii) of the Internal Revenue Code, (b) commodities within the meaning of § 864(b)(2)(B)(ii) of the Internal Revenue Code, or (c) any combination of stocks, securities and commodities described in subparagraphs (a) and (b) above.
