Before it opened a formal New York sales office, a Florida homebuilder advertised in New York papers using an officer's home telephone number, and that officer met with prospective customers at his Long Island home. Did that activity amount to 'maintaining an office' in New York, subjecting the company to New York franchise tax even before the formal office opened?

Plain-English summary

Gulf Homes, Inc., a Florida real estate development corporation headquartered in Florida, builds homes in that state. Starting in 1978, before it opened a formal sales office in Massapequa, New York in August 1980, Petitioner solicited New York business by regularly advertising in New York newspapers. The ads listed the New York home telephone number of one of Petitioner's two officers (also a company employee); when customers called, the officer's wife or daughter relayed messages, since the officer himself spent most of his time in Florida. When he did return to New York, he met with responding customers at his own Long Island home, the customer's home, or another mutually convenient location in the metro area. Every contract, however, was mailed to prospective buyers but ultimately approved, accepted, finalized, and closed in Florida, where financing and mortgage arrangements were also handled.

New York's Article 9-A franchise tax reaches a foreign corporation that is doing business, employing capital, owning/leasing property, or maintaining an office in New York (Tax Law § 209.1). The Franchise Tax Regulations define an "office" broadly: "any area, enclosure, or facility which is used in the regular course of the corporate business," and specifically note that "[a] salesman's home... may constitute an office" (20 NYCRR § 1-3.2(e)). A more detailed regulation spells out the test: if a salesman uses his house for business, with a company-listed telephone through which he makes or receives business calls and orders, "the residence will be treated as an office of the corporation, and the corporation will be taxable" (20 NYCRR § 1-3.4(b)(9)(vi)).

Applying that test, the Department found Petitioner held the officer's residence out as a place of business by publishing its phone number in New York advertising, and that the officer actually used the home in the regular course of Petitioner's business -- receiving and initiating calls there, and holding customer meetings there. That combination meant the residence was "maintained" as an office within the meaning of Tax Law § 209.1, and Petitioner was therefore subject to Article 9-A tax for the pre-August-1980 period, notwithstanding that every sale was ultimately finalized in Florida.

What this means for you

Businesses using an employee's home before opening a formal office

Advertising a home telephone number to the public and actually conducting business calls or in-person customer meetings from that residence can itself create a taxable New York "office" -- even if every contract is signed, approved, and closed entirely out of state.

It's the public-facing use, not the deal-closing location, that matters

The Department didn't care that all contracts were finalized in Florida; the taxable trigger was that the New York residence was HELD OUT to the public as a business location and actually used that way (calls, orders, meetings), independent of where the underlying transactions were legally completed.

Compare: activities that stay within P.L. 86-272's protection

This case did not involve a Public Law 86-272 "mere solicitation" defense -- the maintaining-an-office finding is a freestanding basis for New York tax under Tax Law § 209.1 itself, separate from (and not rescued by) the interstate-commerce solicitation safe harbor. Compare TSB-A-85(26)C, which reaches the same "maintaining an office" result -- and cites this very same office-maintenance regulation -- in the very different context of a foreign manufacturer's New York showroom operated through an exclusive sales representative.

Common questions

Q: Can advertising an employee's home phone number by itself create New York tax nexus?
A: Combined with actually using the home to make/receive business calls and meet customers, yes -- the Department treated that pattern as "maintaining an office" under the regulations, regardless of where contracts were ultimately signed.

Q: Does it matter that all the contracts were approved and closed out of state?
A: No -- the taxable office-maintenance finding turned on the New York activity itself (advertised phone number, calls, in-person meetings), not on where the deals were legally finalized.

Q: Would this analysis change today if the officer only worked from home occasionally with no public-facing phone number?
A: The regulation's test turns on whether the residence is "held out to the public" as a place of business (e.g., via an advertised, business-listed phone number) and actually used that way -- occasional unadvertised remote work is a materially different fact pattern from what the Department addressed here.

Q: Can another company rely on this specific ruling?
A: No. It binds the Department only as to Gulf Homes' own facts and can't be relied upon by other taxpayers, even those with similar pre-office home-based sales activity.

Citations and references

Statutes and regulations:

• Tax Law § 209.1
• 20 NYCRR § 1-3.2(e)
• 20 NYCRR § 1-3.4(b)(9)(vi)

Related rulings:

• TSB-A-85(26)C -- a year later, the Department applied the same "maintaining an office" regulation (20 NYCRR § 1-3.4(b)(9)(vi)) to hold that a foreign manufacturer's New York showroom-sales office, run through an exclusive single-principal sales representative, exceeded P.L. 86-272's protection

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/corporation_ao_1984.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/corporation/a84_10c.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-84 (10) C
Corporation Tax
August 10, 1984

Taxpayer Services Division
Technical Services Bureau

STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. C831208A

On December 8, 1983 a Petition for Advisory Opinion was received from Gulf Homes, Inc.
524 Broadway, Massapequa, New York 11758.
At issue is whether Petitioner's activities within New York State prior to August 1, 1980, at
which time it opened a sales office in New York, would subject it to tax under Article 9-A of the Tax
Law (Franchise Tax on Business Corporations).
Petitioner, a Florida real estate development corporation with its principal offices in Florida,
is a builder of homes in that state. Commencing in 1978, and prior to opening a sales office in
Massapequa, New York, Petitioner solicited business in New York by regularly advertising in New
York newspapers. The advertisements contained, among other things, the New York telephone
number of the Long Island home of one of Petitioner's two officers, which officer was also an
employee of the corporation. The officer's wife or daughter relayed any messages to the officer who,
in fact, spent most of his time in Florida.
When the officer returned to New York, he arranged to meet those people who had responded
to the ads. The meetings were held either at the officer's Long Island home, the customer's home, or
some other mutually arranged location in the metropolitan New York - New Jersey area. Although
contracts for the construction of homes were mailed to the homes of prospective buyers in New
York, all contracts were approved, accepted, finalized and consummated in the State of Florida,
where all necessary financing and mortgage arrangements were made and where all closings
occurred.
Section 209.1 of the Tax Law, in pertinent part, imposes a tax on a foreign corporation which
is doing business, employing capital, owning or leasing property or maintaining an office in New
York. The Franchise Tax Regulations, which expound on the nature of the activities constituting
maintenance of an office, provide that "[a]n office is any area, enclosure, or facility which is used
in the regular course-of the corporate business. A salesman's home . . . , may constitute an office."
20 NYCRR §1-3.2(e). This concept is further elucidated in the following:
"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
salesman uses his house for business. A telephone, listed in
the corporation's name, is maintained at the salesman's house.
The salesman 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, and the corporation
will be taxable." 20 NYCRR §l-3.4(b)(9)(vi).

RODERICK G. W. CHU, COMMISSIONER
TP-8 (3/83)

GABRIEL B. DiCERBO, DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR

-2­
TSB-A-84 (10) C
Corporation Tax
August 10, 1984

In the present case, Petitioner held the officer's New York residence out as a place of business
by including the telephone number in the New York advertisements. Further, the officer actually
used his residence in the regular course of Petitioner's business, there receiving and initiating
telephone messages and, further, using the home for meetings with prospective customers. The
officer was, therefore, using his Long Island home for the business purposes of Petitioner. Since such
usage constituted maintenance of an office, within the meaning and intent of Section 209.1 of the
Tax Law, Petitioner was subject to tax under Article 9-A of the Tax Law with respect to the period
at issue.

DATED: August 3, 1984

s/FRANK J. PUCCIA
Director
Technical Services Bureau

NOTE: The opinions expressed in Advisory Opinions
are limited to the facts set forth therein.