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July 18, 2023

Minnesota Tax Court holding provides guidance on whether taxpayer's activities create nexus for income tax purposes and are protected by PL 86-272

In Uline, Inc. v. Comm'r. of Revenue,1 the Minnesota Tax Court (tax court) evaluated the application of PL 86-272 to the taxpayer's facts and granted both parties' motions for summary judgment on various items. It also remanded the case to the Minnesota Department of Revenue (Department) for a determination of income tax due.


The taxpayer was an S corporation, headquartered in Wisconsin, that sold industrial and packaging products. It shipped products via distribution centers located in the United States. The taxpayer had no offices or other facilities in Minnesota and shipped its goods to Minnesota customers via common carrier. The taxpayer employed sales representatives who called on Minnesota customers. The taxpayer did not file Minnesota income tax returns, primarily relying on PL 86-272. The Department reviewed the taxpayer's activities in Minnesota and concluded that certain activities performed by non-sales personnel and sales personnel were nexus-creating and not protected by PL 86-272.


The tax court first focused on activities performed by non-sales personnel. The first activity was 10 visits by human resources employees to Minnesota during the two-year audit period to attend job fairs. During these visits, the employees provided attendees written materials about the company and conducted informational interviews. To be considered for a position, attendees had to apply to an address associated with the Wisconsin headquarters or online. The tax court concluded that this activity did not fall within Minnesota's minimum contacts statute2 and also observed that the Department's own guidance,3 in the context of sales tax nexus, did not consider holding recruiting events in Minnesota when determining whether an out-of-state business has nexus.

In addition, the tax court considered a second activity conducted by non-sales personnel and involving one of the company's individual owners, who was a Minnesota resident. The individual's primary office was located outside Minnesota, but he performed some of his duties, such as answering emails and phone calls using a company-issued electronic tablet and mobile phone, while working from his Minnesota residence. According to the tax court, the record indicated that the individual's business card did not suggest he had a home office nor could the company's customers or employees contact the individual at home for any reason (with the exception of a branch manager). Accordingly, this activity did not result in the individual maintaining an "in home office" and did not create nexus.

The tax court then turned to activities conducted in Minnesota by sales personnel, evaluating PL 86-272 protection. The first activity was 10 instances during the two-year audit period of sales representatives accepting a product return from a customer. The tax court rejected the taxpayer's argument that the acceptance of product returns was ancillary to solicitation.

The second activity involved the role of sales representatives in resolving customer complaints. The sales representatives would collect samples of defective products and forward them to the home office for analysis. The Department asserted that this was a quality-control activity. The tax court concluded that the reporting of customer complaints, including the collection of samples of purportedly defective products, was ancillary to solicitation. The sales representatives were merely conveying information, as corporate headquarters resolved the complaints.

The third activity was the preparation, by sales representatives, of "Market News Notes," which involved obtaining information from customers about competitors' products and business practices. The tax court viewed this activity as distinct from solicitation and unprotected by PL 86-272.

Finally, the tax court considered whether the two unprotected activities, the acceptance of product returns and preparation of the Market News Notes, were de minimis. Regarding the product returns, the tax court observed that the company had no written policy requiring sales representatives to perform this activity. In the absence of such a company policy, the 10 instances of product returns were found to be de minimis. There was, however, a company policy for the preparation of the Market News Notes. This policy required sales representatives to prepare two reports each week; the training manuals stressed the importance of this activity. Because this was a required activity, the tax court found that it was not de minimis. As all non-ancillary activities should be considered together for purposes of a de minimis analysis, the two activities, taken together, were not de minimis, so PL 86-272 protection did not apply.


The court's decision, while not remarkable on its facts, provides a thorough analysis, starting with whether activities consisted of minimum contacts for nexus purposes and then evaluating whether otherwise nexus-creating activities were protected by PL 86-272, including de minimis considerations. Businesses also should consider that the Department recently circulated a draft revenue notice requesting comment on the adoption of the Multistate Tax Commission's revised statement of information on PL 86-272, which focuses on internet-related activities. (See Tax Alert 2021-1608.) The Department has yet to formally issue the guidance, but had indicated that it was going to follow the Commission's guidance retroactively. EY will continue to monitor developments in this area.


Contact Information
For additional information concerning this Alert, please contact:
State and Local Taxation Group
   • Bill Nolan (

Published by NTD’s Tax Technical Knowledge Services group; Jennifer A Brittenham, legal editor



1 Uline, Inc. v. Comm'r. of Revenue, File No. 9435-R (Minn. Tax Ct. June 23, 2023).

2 Minn. Stat. 290.015, subd. 1(a).

3 Minn. Dept. of Rev. Notice 02-20 (December 2, 2002).