About the law

Federal Public Law 86-272, enacted in 1959, limits a state's right to tax out-of-state companies selling of tangible personal property. This does not protect corporations that profit from the use of intangible property or the sale of services in Oregon. It does not protect businesses incorporated in Oregon.
Pub.L. 86-272 prohibits Oregon from imposing net income taxes on out-of-state companies selling tangible personal property whose business activities in Oregon are limited to the solicitation of orders by their employees or representatives. This protection is available only if the orders are approved outside Oregon and the merchandise is shipped or delivered from a location outside Oregon.
The U.S. Supreme Court narrowly interpreted Pub.L. 86-272 to protect only the actual solicitation of orders and activities entirely ancillary to the solicitation of orders. For more information, read the "Statement of Information Concerning Practices of Multistate Tax Commission and Signatory States Under Public Law 86-272." This statement is available in the publication "Model Regulations, Statutes and Guidelines" at the website
An out-of-state company that sells or solicits orders through an independent contractor in Oregon may be protected under Pub.L. 86-272 even if the independent contractor has an office in Oregon. An independent contractor is one who is engaged in selling or soliciting orders for the sales of tangible personal property for more than one principal, and who is held out as such in the regular course of conducting business activities [15 USCA Subsection 381(d)(1)].
An out-of-state company has nexus and is considered to be "doing business" in Oregon if activities (not protected by Pub.L. 86-272) performed in Oregon on behalf of the taxpayer are significantly associated with the taxpayer's ability to establish and maintain a market in Oregon.
For example: Nexus exists when in-state repair and warranty services provided by an independent contractor on behalf of a direct marketing computer company are advertised as part of its standard warranty or as an option that can be separately purchased. The extension of immunity for activities by independent contractors under Pub.L. 86-272 does not include repair and warranty service.