PL 86-272: The “Big Bill” That Could Change Internet-Based Solicitation

by | May 19, 2025 | State and Local, Tax News | 0 comments

Buried on page 115 of the latest omnibus bill is a potential game-changer: a provision redefining “solicitation” under Public Law 86-272 to include internet-based activities.

By Stacey Roberts and Meredith Smith

On page 115 of 116 of the One, Big, Beautiful Bill, lawmakers slid in a provision on Public Law 86-272. Essentially a reintroduction of a 2024 bill, the provision in Section 70302 on Solicitation of Orders Defined would expand the protections of federal law, negating state initiatives to claim more revenue by undermining the protections of PL 86-272.

The legislative proposal that has emerged could significantly reshape how Public Law 86-272 is interpreted—especially in the digital age. The 2025 proposal seeks to clarify and expand the definition of “solicitation” under PL 86-272 to include internet-based activities.

The bill, introduced in Congress and referenced in recent commentary and legal analysis, proposes a critical update: it explicitly states that internet activities fall under the umbrella of “solicitation” as protected by PL 86-272. This move directly challenges the Multistate Tax Commission’s (MTC) revised guidance, which guided states to narrow the protections offered to businesses and potentially subjecting them to state income tax in more jurisdictions. New Jersey and New York have adopted and enforced the MTC revised guidance, and many of you know that California tried but failed to adopt and enforce.  

If passed, this bill would effectively invalidate the MTC’s revised statement by codifying that digital interactions—such as cookies, online job applications, and other web-based engagements—are protected activities under federal law, thus eliminating double taxation between federal and state entities.

Why It Matters for Business Taxpayers

For businesses operating across state lines, especially those with a strong online presence, this bill could be a game-changer. Here’s what it could mean:

  • Expanded Protection: Companies could claim PL 86-272 protection for a broader range of internet-based activities, shielding them from state income tax obligations in states where they have no physical presence.
  • State Law Conflicts: States like New Jersey and New York, which have implemented rules or rulings contrary to Congress’ interpretation, would likely need to revise or repeal those measures.
  • Legal Precedents at Risk: Notably, the A.C.M.A. case in New York could be rendered moot, as the federal law would override state-level interpretations. While the New York Supreme Court recently upheld the city’s MTC-like rule, it also ruled that retroactive application to 2015 violated due process. The federal bill would likely nullify the New York rule altogether.

The Takeaway

Lawmakers have twice introduced a similar provision on online solicitations indicating there is some momentum behind the change. Its inclusion in a larger omnibus-style legislative package might increase its chances of passage, especially if it remains a relatively low-profile, end-of-document addition.

This proposed update to PL 86-272 could bring long-awaited clarity to the intersection of federal tax protection and modern digital commerce, and reign in aggressive states trying to undermine the federal protections. While its future remains uncertain, businesses and tax professionals alike should keep a close eye on its progress. If enacted, it could significantly reduce the compliance burden for companies dealing with the web (no pun intended) of state tax obligations in the digital era.

More TaxOps Resources on P.L. 86-272

Disclaimer: This content is for educational purposes only and is not intended, nor should it be relied upon, as legal, tax, accounting or investment advice. You should consult with a competent professional to discuss specifics of your situation and the applicability of the information presented. 

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