Bits and Bytes, Inc. (Bits) sells commercial servers, routers and other technology products in Nevada. In doing so, Bits' sales personnel solicit orders from customers, and the orders are sent to Bits' headquarters outside Nevada for acceptance or rejection. If accepted, the orders are shipped via common carrier from an inventory located outside Nevada.

In addition to these activities, regional sales managers of Bits are responsible for recruiting, training and evaluating sales personnel working in Nevada. Further, Bits provides sales personnel with cars for use in visiting prospective and existing customers. Finally, Bits' sales personnel periodically mediate customer complaints when doing so would appease the customer and enhance the likelihood of future orders. Bits has no other activities in Nevada.

Would Bits' activities in Nevada be protected from the imposition of a net income tax in Nevada under P.L. 86-272?

A. No. The activities of recruiting, training and evaluating sales personnel exceed the protections of P.L. 86-272.

B. Yes. Nevada does not impose a net income tax.

C. No. Under the Quill decision, Bits' physical presence in Nevada is sufficient under the Due Process Clause to support the imposition of a net income tax.

D. Yes. All of Bits' activities in Nevada are protected activities under P.L. 86-272.

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