Supreme Court Case Among State and Local Tax Issues to Watch

"Many of those developments will continue to affect SALT in 2026 as we see renewed challenges to Public Law 86-272, a federal law that prohibits states from imposing income taxes on out-of-state businesses that only solicit sales of tangible personal property in the state. There also will be developments involving digital advertising taxes, federal tax law changes, interstate disputes, and a US Supreme Court ruling involving the government's right to take property to satisfy a tax lien."

"Additional states moved to adopt the Multistate Tax Commission's revised statement of information on the federal law last year. Going into 2026, states attempting to adopt the MTC's revised Public Law 86-272 guidance related to internet activities can expect to receive pushback from taxpayers and industry associations. A key player leading the charge against these states is the American Catalog Mailers Association, which challenged the adoption of the MTC's revised guidance in two states during 2025."

"Taxpayers should continue to monitor states' efforts to interpret the protections afforded under Public Law 86-272 as it relates to activities conducted over the internet in the association's appeals in New York and New Jersey by following developments in American Catalog Mailers Associationv. Department of Taxation and Finance and American Catalog Mailers Association v. Director, Division of Taxation. Digital Advertising Tax Maryland was the first state to enact a digital advertising tax in 2022, and it has been entangled in litigation ever since."

States and taxpayers renewed challenges to longstanding state and local tax issues in 2025, creating carryover effects into 2026. Renewed litigation centers on Public Law 86-272 and its application to internet solicitation of sales. Multiple states began adopting the Multistate Tax Commission's revised guidance, prompting challenges from industry groups such as the American Catalog Mailers Association in New York and New Jersey. Digital advertising taxes remain contentious, with Maryland's 2022 law facing sustained litigation. Additional developments include federal tax law changes, interstate tax disputes, and a pending US Supreme Court matter about property seizure to satisfy tax liens.

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