Public Law 86-272 (P.L. 86-272) offers limited protection to out-of-state companies that solely solicit sales for tangible personal property within a state. Small and medium-sized businesses in the manufacturing, distribution and retail sectors have heavily relied upon this state protection since it was enacted in 1959 to decrease overall tax liability.
In 2021, the Multistate Tax Commission (MTC) released a controversial reinterpretation of what activities may be considered more than mere sales solicitation. The MTC guidance suggests that some internet-based activities such as post purchase chats, online tutorials and cookies used for data mining may cause a business to no longer qualify for the protection of PL 86-272.
In this episode, Brooks Nelson, Partner and Strategic Tax Leader, and Sarah McGregor, Tax Director, are joined by Louis Cole, Partner and State & Local Tax Services Leader, and Cathie Shaw, National Tax Partner. Together they discuss the current challenges surrounding P.L. 86-272 and the increasing pressure stemming from the evolution of modern-day business practices.
Listen to learn more about:
- 04:07 – P.L. 86-272 background
- 05:25 – MTC authority
- 06:45 – Businesses that have adopted MTC interpretations
- 10:07 – MTC impact on small businesses
- 12:45 – Determining nexus without the sale of tangible goods
- 14:59 – Relevance of nexus studies
- 16:59 – Record keeping and internet activity analyses
- 19:43 – Mitigating compliance burden
Related Insights
- The Income Tax Nexus Battle and Federal Public Law 86-272
- Understanding Public Law 86-272: State Income Tax Protections in the Digital Era
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