skip to main content
X

ONLINE SELLERS COULD OWE NEW STATE INCOME TAXES IN THE NEAR FUTURE

ONLINE SELLERS COULD OWE NEW STATE INCOME TAXES IN THE NEAR FUTURE

For years, Public Law 86-272 prohibited states from imposing income taxes on out-of-state businesses if their only activity within the state is soliciting sales of tangible personal property. The Multistate Tax Commission recently revised this to reflect the impact of e-commerce and removed a portion of this protection for sellers that weave online support services into their e-commerce models.

The commission presented various scenarios that may or may not qualify for the income tax protections afforded under the federal law. For instance, businesses providing post-sale assistance through a list of frequently asked questions would still qualify for federal protections. But electronic chat functions aimed at helping customers trouble shoot problems wouldn’t qualify.

Nineteen states and the District of Columbia supported the new legal interpretation of the federal law during the commission’s annual meeting on August 4. But those states will still have to take steps to incorporate it into their tax codes. States do not have to adopt the new legal interpretation.

E-commerce businesses will need to monitor the guidance and enforcement initiatives coming out of state revenue agencies to avoid potential penalties for failing to file income tax returns in a particular state.

 

09/07/21

 

HAVE A QUESTION?

Please complete this form to hear from one of our seasoned tax professionals

Hide Firm Disclaimer

©2021 UHY LLP. ALL RIGHTS RESERVED.

UHY LLP is a licensed independent CPA firm that performs attest services in an alternative practice structure with UHY Advisors, Inc. and its subsidiary entities. UHY Advisors, Inc. provides tax and business consulting services through wholly owned subsidiary entities that operate under the name of "UHY Advisors." UHY Advisors, Inc. and its subsidiary entities are not licensed CPA firms. UHY LLP and UHY Advisors, Inc. are U.S. members of Urbach Hacker Young International Limited, a UK company, and form part of the international UHY network of legally independent accounting and consulting firms. "UHY" is the brand name for the UHY international network. Any services described herein are provided by UHY LLP and/or UHY Advisors (as the case may be) and not by UHY or any other member firm of UHY. Neither UHY nor any member of UHY has any liability for services provided by other members.

On this website, (i) the term "our firm", "we" and terms of similar import, denote the alternative practice structure conducted by UHY LLP and UHY Advisors, Inc. and its subsidiary entities, and (ii) the term "UHYI" denotes the UHY international network, in each case as more fully described in the preceding paragraph.