Online Business Activity? New York State Is Preparing to Lose Protection on PL 86-272

Online Business Activity? New York State Is Preparing to Lose Protection on PL 86-272

May 10, 2022

Jeanna Schenk, CPA, MST

  • New York Adopts Multistate Tax Commission (MTC) Internet Activities Guidance

    In light of the Multistate Tax Commission’s guidance in August 2021 suggesting how states should tax internet sales, New York has issued a draft rule that undoes certain income tax protections previously allowed for out-of-state retailers. With the new rule, New York would become the second state to conform to the MTC guidance. California released a technical memorandum also revising how internet activities are taxed back in February 2022.

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As a reminder on the MTC guidance, it addressed the taxability of companies making internet sales into a state and whether those actions create nexus and extend beyond the protections of PL 86-272. The guidance gives examples of the types of online business activities that would defeat PL 86-272 immunity such as providing post-sale assistance via email or chat, soliciting and receiving applications for credit cards, inviting job applications for non-sales position, placing internet cookies onto the computers of in-state customers, and remote repairs and upgrades.

When MTC released the guidance back in August 2021, many critics argued that the update essentially wipes out PL 86-272 and the decision should not lie with the MTC, but rather with Congress. However, with New York and California starting to adopt this new guidance, and surely more states to come, taxpayers need to make sure they understand their internet activities and potential additional filing requirements. 


Please contact REDW State and Local Tax Manager Jeanna Schenk  or Principal George Rendziperis. We would be happy to discuss your unique tax situation and answer any questions you may have for your online business activity.

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