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.
Read the full article by Law 360 Tax Authority here (subscription required).