Interstate commerce business registration requirements
What states in the United States, if any, require business registration to solicitate business and collect revenue?
In this scenario, the business has no opperations in the state the business is solicating business, solicitation is done via email/mail/phone/etc, service/product delivery is done via "common courier" (meaning mail/Internet/etc); all of which to my understanding means no sales tax is required in the "foreign"/customer state, or the "domestic"/business state.
What's not clear is if any registration is required in any "foreign" states (for example: DBAs, permits, license, etc.) --or if the only require is you're in good standing if the "domestic" state.
Given the laws related to sales tax are likely more important, and allow for low requirements to do interstate commerce -- my guess is there are no requirements, but I'm unable to find any opinions, laws, case law, etc that appears to relate to the topic of filing requirements for interstate commerce in foreign states where the business has no operations; as defined by laws related to sales tax.
Business off the top of my head that this might relate to are; Internet retail, mail catalogs, SaaS, etc.
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I'm pretty sure you are right that there are no such registration requirements. – Kekito 12 years ago
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+1 @Jeff: Thanks for the feedback! This is the second version of the same question, since as I learn about (for example the laws related to interstate sales tax) - the issue at hand are becoming more clear. This there anything within the question that's unclear, awkardly stated, etc.? I've thought of doing a round of call to key states depts of business registration, but based on past experience it's very hit or miss, and they're often unable to point to online state laws or policies; meaning they're just giving an opinion, which often comes off as misinfo and an attempt to get off the phone. – Blunders . 12 years ago
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I agree with you that it is likely not productive to call state agencies to try to get this info. For this kind of thing, I think it is safe to assume you are right and in the unlikely event that you missed something it is likely easy to fix after the fact. If there are such requirements then most companies are ignoring them. :) – Kekito 12 years ago
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+1 @Jeff: Maybe, though it's unlikely. If a company engages in intrastate commerce without doing the required legal actions, my understanding is that prosecutions may result. – Blunders . 12 years ago
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The state may knock on your door and say you need to fix this, and there may be some financial penalties, but states are generally interested in compliance rather than punishments. For example, a startup I was at neglected to pay state use tax. We had to do an audit and fix it retroactively but it ultimately wasn't a big deal. – Kekito 12 years ago
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+1 @Jeff: Makes sense, thanks for sharing -- while I enjoy extralegal plays, I tend to play it safe, and given my record of success in a wide, wide variety legal matters, it's worked well for me -- also firmly believe that ignorance of the law is no excuse; though most actions have related risks, understand your logic, and agree it makes sense. Cheers! – Blunders . 12 years ago
1 Answer
Whether you are "doing business" in a state can be asked for three different purposes. You have mentioned two of them: For the purpose of requiring registration to conduct business, and for the purpose of taxation. The third is for the purpose of subjecting the company to the jurisdiction of the state's courts.
I will not address taxation, because it is outside my areas of expertise.
As concerns requiring registration to conduct business, that is not established solely by interstate commerce - activities within the state are required. For example, in California the test is "entering into repeated and successive transactions of its business in this state, other than interstate or foreign commerce".
These issues are discussed in When “Doing Business” isn’t “Doing Business”. You might find the New York Department of State Legal Memorandum referenced toward the end of that post particularly informative.
Disclaimer: This information does not constitute legal advice and does not establish an attorney-client relationship.
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+1 Dana Shultz: Awesome, I expected that if such laws existed CA and NY would be the most likely, though based on the info you provided I was able to find additional states with a similar statute to California-Corporation-Code-Section-191, though it's unclear if you're saying CA requires a foreign (Corp from another US state) to register if they only doing interstate commerce. Again, thanks, your input was a huge, huge leap in my understanding! – Blunders . 12 years ago
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In case it's of interest to anyone, I've finished reviewing a doc that covers one person's opinion on related laws to ["Foreign LLCs" statues for 25 US states](http://keepyourassets.net/wp-content/uploads/2011/05/regex.pdf) – Blunders . 12 years ago
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To add a little clarity to the legalese: Absent unusual circumstances, if you don't have any employees in a state, then you don't have to register in the state. – Kekito 12 years ago
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+1 @Jeff: Yes, I agree -- though it appears that this applies largely to corps, not sole proprietorship based on laws I've reviewed; in my case, I was just going to run with a sole proprietorship, but appears interstate commerce laws assume the business is of scale, which is what it is. Basically, the main gap in my analysis at this point is how a sole proprietorship formation effects the interstate commerce laws. – Blunders . 12 years ago
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@Dana Shultz: After reviewing a comment by you on your blog post that you link to in your answer, I believe the state of your opinion is: "Internet-only contacts [i.e. interstate commerce] with a state are not sufficient to require a foreign entity to do business in that state [ie register]."; where the [text] in brackets is my opinion of your meaning. So, only outstanding issue to me is the effect of business formation on interstate commerce laws in question; meaning they appear to relate to corps, not sole proprietorships. – Blunders . 12 years ago
