USA – NEW YORK Trends and Developments Contributed by: Eugene J. Gibilaro and Joshua M. Sivin, Blank Rome LLP
customers to browse products or check order sta - tus should not suddenly expose a company to state income tax. Similarly, using cookies for basic analytics or to improve the user experience on a company’s website is standard business practice and not the kind of in-state physical activity that Congress intended would negate P.L. 86-272 protection. The state taxing authorities are arguably using tech - nological advances as an excuse to effectively negate P.L. 86-272 through aggressive interpretation. Con - gress enacted the statute to provide certainty and to prevent states from imposing undue burdens on inter - state commerce, and only Congress can change the governing rules. If states can nullify the protection by characterising routine Internet activities as unprotect - ed, the statute’s purpose is frustrated. To the extent New York seeks to apply its regulations in a manner that unlawfully denies taxpayers their federal protec - tions, taxpayers should be ready to fight. The ACMA litigation and broader implications The American Catalog Mailers Association (ACMA) has challenged New York’s regulations concerning P.L. 86-272 in state court, arguing that New York has exceeded its authority under the federal statute. Specifically, the ACMA sought a declaration that the 2023 regulations are preempted by federal law and that New York was improperly applying them retro - actively to 2015. The New York State Supreme Court (a trial court) found that P.L. 86-272 does not prohibit the State from identifying and regulating which inter - net activities are construed by New York to constitute more than protected activity and ruled that there is no conflict between the regulations and P.L. 86-272. However, the court struck down the retroactive appli - cation of the regulations. See American Catalog Mail- ers Association v Department of Taxation & Finance , Index No. 903320-24 (N.Y. Sup. Ct. Apr. 28, 2025). The ACMA has appealed the portion of the decision finding that New York’s regulations are not preempted, and the case is working its way through New York’s appeals courts. The parties submitted briefing to a New York intermediate appellate court in the summer of 2025, and oral argument took place in February 2026. This case has the potential to provide impor - tant clarity on the scope of P.L. 86-272 protection in
the digital age, and the outcome could have signifi - cant implications for businesses across the country. A decision favourable to taxpayers could rein in state efforts to narrow P.L. 86-272 and reaffirm the statute’s role as a meaningful safe harbour. A decision favour - able to the states could accelerate the erosion of P.L. 86-272 protection and expose businesses to income tax obligations in states where they have no physical presence based solely on their interactions with in- state persons via the internet. Practical considerations for businesses Given uncertainty in this area, businesses should carefully examine their digital activities to understand potential nexus exposure. This includes reviewing website functionality, mobile applications, use of cookies and tracking technologies, and post-sale customer interactions. Companies that have histori - cally relied on P.L. 86-272 protection should assess whether their current activities might be viewed as exceeding that protection under New York’s regula - tions or similar guidance in other states. However, businesses that believe they are entitled to P.L. 86-272 protection should not simply accept a state’s contrary position. The regulations represent the state’s view of federal law, but that view is subject to challenge. Taxpayers with principled positions should be prepared to defend them and assert their federal protections. Looking Ahead New York corporate taxation is complicated and con - stantly changing. Companies need to stay on top of developments. A few things to watch in the coming months and years: New York City’s Mayor has discussed his desire to raise taxes on New York City’s most profitable corpo - rations (though that would require state action). At the State level, the latest budget proposal did not include a corporate tax increase, though it would extend the State’s temporary top corporate tax rate of 7.25% through 2029. And changes at the federal level can affect State and City tax bases in unexpected ways. For businesses with operations, employees, or cus - tomers in New York, proactive review of their corpo -
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