The below excerpt is from Sanjay Talwani’s article, “Top 5 State & Local Tax Policies Of 2022: Midyear Report,” published by Law 360 on July 8, 2022. Read the full article on Law360 here (subscription required).
The Interstate Income Act of 1959, better known as P.L. 86-272, stood out as a top state and local tax issue in the first half of 2022.
Last year, the Multistate Tax Commission (“MTC”) issued a statement of information explaining how many online activities could cause a business to lose the protections of P.L. 86-272. In February, California echoed that statement with a technical advice memorandum outlining several common activities that fall outside the protections. New York has also issued similar draft regulations.
Jordan M. Goodman and other tax practitioners told Law360 the MTC’s interpretation of P.L. 86-272 unfairly expands the kinds of activities that disqualify income from the law's protections and exposes them to local taxation.
“I'm not an engineer, but it just seems to me that there's no difference between what was accepted with what you could do by phone call and what you can do by being online,” says Jordan.
Jordan and his fellow practitioners all agreed that litigation is likely down the road as California and potentially other states enforce the guidelines.