States are continuing to take action after guidance issued by the Multistate Tax Commission in August 2021 regarding whether a seller’s online presence creates nexus for state income taxes.
The MTC’s guidance discusses online activities that go beyond sales solicitation under Public Law 86-272, enacted in 1959 to exempt out-of-state sellers from state income taxes if activities in a state were limited to solicitation for sales of personal property. Online activities that go beyond sales solicitation include the use of certain cookies, taking applications for nonsales positions, and the existence of chat functions to answer post-sale questions.
States such as California, New York, New Jersey, and Oregon have started addressing these matters either through changes in statute or through other administrative means. This leaves many unanswered questions, and taxpayers should pay careful attention to activity concerning this topic since it could increase the state filing obligations for many businesses that sell goods.
