The Interplay of PL 86-272 and Economic Nexus

This course will explain nexus as outlined in PL 86-272, the sometimes conflicting nexus regulations established by individual states, and how to reconcile the two for the benefit of the taxpayer.

PL 86-272 is still alive and well; for sellers of tangible personal property post-Wayfair, more so than ever. But the Multistate Tax Commission (MTC) and the state of New Jersey have adopted controversial expanded interpretations to capture more internet-based activities. Most states have or are in the process of adopting bright-line tests for sales tax nexus. Businesses are increasingly relying on the protection of PL 86-272 to circumvent the broadening reach of economic nexus and avoid out-of-state taxation.

PL 86-272 prohibits a state from taxing an out-of-state company's net income if its only activity is the solicitation of orders for the sale of tangible personal property within the state. Wayfair clearly states that physical presence is not necessary to establish nexus; having "substantial economic nexus" is sufficient.

Many states are taxing entities based on gross receipts or similar thresholds.

Reassessing tax liability impacts more than tax liability: Companies must update financial statement provisions, including current and deferred taxes, uncertain tax benefits, and related disclosures. SALT advisers and companies must reevaluate prior nexus determinations for both sales and state income tax liability.

Listen as our panel of experts explains which companies come under the umbrella of PL 86-272, which states are narrowly interpreting PL 86-272, and how to assess potential liability in states in this continually changing post-Wayfair environment.