Article
Adjust online business practices in light of New York internet activities rule rulings
May 19, 2025 · Authored by Phil Horwitz, Mark Hawkins
A recent ruling by a New York supreme court — New York’s trial level court — regarding the state's Internet Activities Rule marks a significant development in the interpretation of Public Law 86-272.
Adopted in 1959, PL 86-272 is a federal preemption of state income taxation; a law prohibiting any state from applying its income taxing power to any business whose activities in the state are limited to the solicitation of sales for tangible personal property.
The New York court ruled in favor of the New York Department of Taxation & Finance and upheld the Department’s new interpretation of the Federal law. At the same time, the court struck down New York’s attempt to apply the rule retroactively to 2015 and held it could only be applied to activities engaged in on or after Dec. 27, 2023, the publication date of the final rule.
Who’s affected by the ruling
Any business that sells products online and interacts with customers in New York could be significantly affected by this ruling.
Key groups include:
- Businesses engaged in internet commerce. Companies operating online and selling tangible personal property (TPP), particularly those based outside of New York but selling to New York customers, may need to review their activities toward customers in New York to understand the tax compliance implications of the recently upheld agency interpretation.
- Industry associations. Organizations advocating for businesses in the e-commerce space will be impacted as they work to represent their members' interests in light of the ruling
Companies should begin analyzing their internet activities and compliance strategies immediately.
The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.