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1 Abir Mandal & Manish Bhatt, Modernizing PL 86-272: Balancing State Tax Authority with Interstate Commerce Protections 1 (2025)

handle is hein.taxfoundation/mzgplbl0001 and id is 1 raw text is: TAX FOUNDAT ON Modernizing PL 86-272: Balancing State Tax Authority with Interstate Commerce Protections Abir Mandal Manish Bhatt Senior Policy Analyst Vice President of State Policy Dec. 2025 Key Findings * States have broad corporate income tax authority, but Public Law 86-272-which affirms that busi- nesses do not establish nexus in a state merely through the solicitation of sales-offers critical protec- tions to businesses in states with which they have only limited contact. * As written, the law only protects businesses engaged in the sale of tangible property. However, the expansion of the service economy and the rise of digital commerce in the decades since passage of PL 86-272 argues for modernization. * As a result of the relatively ambiguous language of the statute and attempts by some to erode its core protections, PL 86-272 is facing growing obsolescence. * States should resist proposals to eviscerate the protections of PL 86-272 through legally dubious means, including so-called cookie nexus under which the use of internet cookies is sufficient to es- tablish nexus in any state where the company's website can be accessed. * Without legislative modernization, businesses will continue to face uncertainty, litigation, and rising compliance costs. The Tax Foundation is the worlds leading nonpartisan tax policy 501 (c)(3) nonprofit. For over 80 years, our mission has remained the same: to improve lives through tax policies that lead to greater economic growth and opportunity. TAX FOUNDATION 1325 G STREET, NW, SUITE 950, WASHINGTON, DC 20005 202-464-6200 I taxfoundation.org