News Summary
The New York State Supreme Court has determined that a regulation limiting Public Law 86-272 cannot be applied retroactively, impacting internet business activities. The ruling invalidates tax parameters intended to be retroactive to January 2015, as businesses were not notified of the changes. This decision emphasizes due process rights and could influence future state regulation cases. Moreover, discussions regarding amendments to P.L. 86-272 to enhance protections for internet businesses are currently underway, reflecting ongoing debates between state and federal regulations.
Albany, New York – The New York State Supreme Court has ruled that the state’s regulation limiting Public Law (P.L.) 86-272 cannot be applied retroactively. This ruling comes as a significant decision concerning the relationship between state regulations and federal law regarding internet business activities.
In the case of American Catalog Mailers Association v. Department of Taxation & Finance, filed under Index No. 903320-24, the court determined that New York’s regulation, enacted in December 2023, which aimed to impose tax parameters retroactive to January 1, 2015, was invalid. The court highlighted that businesses operating in New York had not received any prior notification of these changes before they were implemented, which infringed on their ability to adequately adjust their operations.
The ruling emphasized the principles of due process, pointing out that enforcing such regulations retroactively over an extended duration, nearly nine years, poses substantial concerns. The court declared that retroactive application violated the rights of businesses trying to operate under the established tax laws as they understood them.
While the court nullified the retroactive aspect of the regulation, it clarified that New York’s regulations themselves do not conflict with the provisions of P.L. 86-272. This federal law, originally enacted in 1959, protects out-of-state businesses from state-level net-income taxes when their activities are limited solely to the solicitation of orders for tangible personal property.
The court’s decision further established that P.L. 86-272 does not prevent New York from regulating internet activities that extend beyond mere order solicitation, thereby allowing the state to assert some oversight in this evolving digital landscape.
This ruling could have wider implications, setting a potential precedent that may influence future cases concerning the retroactive application of state regulations. It may lead to increased scrutiny of similar challenges by other businesses subjected to state-imposed tax regulations that attempt to operate retroactively.
In light of the ruling, discussions among federal legislators are underway regarding possible amendments to P.L. 86-272. The objective is to consider expanding protections related to internet business activities that are considered ancillary to the solicitation of orders, highlighting the ongoing discourse about balancing state regulatory frameworks with federal protections.
An appeal against the decision from the American Catalog Mailers Association was filed with the Appellate Division, Third Department on May 13, 2025. This appeal indicates that the organization aims to challenge various aspects of the ruling, particularly the court’s assertions concerning the validity of the state regulations moving forward.
As businesses that engage with New York consumers navigate these legal landscapes, the implications of this ruling are likely to affect their operational strategies and compliance practices. The case continues to unfold, attracting attention from business owners and regulators alike keen on understanding the future of tax regulations in the digital marketplace.
Deeper Dive: News & Info About This Topic
- Grant Thornton: NY Court Upholds Internet Activities Regulations
- Hunton: New York’s Regulations on P.L. 86-272
- Law360: NY Court Upholds P.L. 86-272 Regulations
- CPA Journal: New Guidance for P.L. 86-272
- Law360: An Illegitimate Avenue of Repeal
- Wikipedia: Public Law 86-272
- Google Search: Public Law 86-272
- Google Scholar: Public Law 86-272
- Encyclopedia Britannica: Public Law 86-272
- Google News: Public Law 86-272
Author: STAFF HERE NEW YORK WRITER
NEW YORK STAFF WRITER The NEW YORK STAFF WRITER represents the experienced team at HERENewYork.com, your go-to source for actionable local news and information in New York, the five boroughs, and beyond. Specializing in "news you can use," we cover essential topics like product reviews for personal and business needs, local business directories, politics, real estate trends, neighborhood insights, and state news affecting the area—with deep expertise drawn from years of dedicated reporting and strong community input, including local press releases and business updates. We deliver top reporting on high-value events such as New York Fashion Week, Macy's Thanksgiving Day Parade, and Tribeca Film Festival. Our coverage extends to key organizations like the Greater New York Chamber of Commerce and United Way of New York, plus leading businesses in finance and media that power the local economy such as JPMorgan Chase, Goldman Sachs, and Bloomberg. As part of the broader HERE network, including HEREBuffalo.com, we provide comprehensive, credible insights into New York's dynamic landscape.
