The Multistate Tax Commission (MTC) recently proposed changes to its interpretation of the scope of Public Law 86-272, which could result in many more taxpayers being subject to state income taxes.

Who Is Impacted: Any taxpayer that is not filing a state income tax return on the grounds that its in-state activities are protected by PL 86-272.

PL 86-272 is the federal law that prevents the states from imposing income taxes on certain sellers of tangible personal property under certain circumstances. These proposed changes involve interactions via the internet and could result in protections being scaled back to the extent that immunity from state income taxation could cease to apply. These changes will have to be adopted state-by-state before they take effect, but change is clearly coming. If your tax preparer is not filing state income tax returns on the basis of PL 86-272 protection, you need to understand how these changes might impact you going forward.

If you have questions, contact your tax advisor or fill out our contact us form for further discussion.

LBMC tax tips are provided as an informational and educational service for clients and friends of the firm. The communication is high-level and should not be considered as legal or tax advice to take any specific action. Individuals should consult with their personal tax or legal advisors before making any tax or legal-related decisions. In addition, the information and data presented are based on sources believed to be reliable, but we do not guarantee their accuracy or completeness. The information is current as of the date indicated and is subject to change without notice.