P.L. 86-272 is a narrow federal protection. Under defined conditions, a state may not impose a net income tax when in-state activity is limited to soliciting orders for tangible personal property. It is not an exemption for every digital business, tax or in-state activity.

1. The federal protection has specific elements

Under 15 U.S.C. §381, protected activity generally involves soliciting orders for tangible personal property, sending orders outside the state for approval or rejection, and filling approved orders by shipment or delivery from outside the state. The statute separately addresses limited independent-contractor activity. It applies to state net income tax, not automatically to Sales Tax, franchise, gross-receipts, Payroll or annual-report obligations.

SaaS, digital products, services, licenses and leases do not simply become tangible-property solicitation. Even a product seller may lose protection for a year when in-state activity goes beyond solicitation, subject to the facts and controlling state authority.

2. Classify website functions by activity

A website can accept orders and also troubleshoot products, manage returns, provide remote repair, train customers, administer credit, recruit workers or deliver services. Ask whether each function supports solicitation or performs a separate business activity in the customer's market.

The MTC revised statement supplies a digital-activity framework, but state adoption and interpretation vary and litigation may continue. As of July 18, 2026, confirm current law, guidance and cases in each target state rather than treating one national summary as binding everywhere.

  • Product display, inquiry and out-of-state approval
  • Post-sale support, complaints, returns and warranty work
  • Customer data, credit and account maintenance
  • Downloads, training, technical or consulting services
  • Recruiting, vendor management and nonsales functions

3. Actual remote-worker duties matter

A salesperson limited to protected solicitation may fit the statute. An employee performing management, product development, installation, repair, collection, procurement, HR or continuing customer service from home presents different facts. Titles and employment agreements do not replace evidence of daily work.

Contractors are not automatically safe. The federal law uses a defined independent-contractor concept, and state nexus rules remain separate. Track work state, duties, customer contact, authority, company property and reimbursements, then reassess when the role changes.

  • Actual work state and start date
  • Solicitation, approval, fulfillment and support duties
  • Contract or pricing authority
  • Company equipment, samples, inventory or home office
  • Whether an independent seller represents multiple principals

4. Inventory and fulfillment can break the assumption

FBA, 3PL, consigned inventory, repair parts and return centers place company property in warehouse states. P.L. 86-272 contemplates approved orders filled from outside the state, while in-state inventory and nonsolicitation work can change the result. A marketplace contract address does not answer where inventory actually sits.

Retain monthly inventory states, movement dates, ownership and use, connected to fulfillment and returns. The nature of the activity can matter even when it produces little state revenue.

5. Maintain an annual memorandum, not an oral carryforward

Prepare a state memorandum covering products, approval location, shipping point, people, representatives, inventory, website functions and other services. Limit the conclusion to the relevant tax and identify the changes that require reconsideration.

If protection fails, do not assume a large liability automatically. Complete nexus, apportionment, filing-group and historical-period analysis. For missed periods, then compare VDA, back filing and prospective registration.

Annual P.L. 86-272 fact check

  • Confirm revenue is from tangible personal property
  • Document out-of-state order approval or rejection
  • Confirm approved orders ship or deliver from outside the state
  • List actual activities of every in-state worker and representative
  • Review FBA, 3PL, consigned and return inventory monthly
  • Test website support, recruiting and service functions
  • Separate protection from Sales Tax and other taxes
  • Retain state authority, conclusion and next review date