The below excerpt is from Paul Williams’ article, “Minn. Floats Adopting MTC’s New P.L. 86-272 Guidance,” published by Law 360 on April 28, 2023. Read the full article on Law 360’s website here.
In releasing a draft revenue notice, Minnesota may become the third state to adopt the Multistate Tax Commission's (MTC) new guidance on P.L. 86-272, which outlines what is and what is not an in-state business activity. Last year, the California Franchise Tax Board became the first to conform to the MTC’s guidance through a technical advice memorandum followed by New York state’s tax agency, which also incorporated the MTC’s approach into draft regulations.
According to the MTC’s guidance, if a customer interacts with an out-of-state seller’s website or app, it is considered an in-state business activity. However, simply displaying static photos or text on a website is not considered an in-state business activity. The MTC’s guidance also indicates certain types of internet cookies, such as those used for product development or market research purposes, exceed P.L. 86-272 protections.
Many tax practitioners, including HMB’s Jordan M. Goodman, have raised general concerns with the MTC guidance, stating that it is overboard and would diminish P.L. 86-272’s protections without any changes to the federal law. Jordan said Minnesota’s proposed guidance “guts the protections of P.L. 86-272 as applied to any business that has a standard website.”
“P.L. 86-272 is a federal law and therefore, states are not allowed to ignore or minimize by statute, regulation, bulletin or through the audit process,” Jordan added.