Suit challenging California’s P.L. 86-272 guidance filed

August 25, 2022 | Authored by RSM US LLP

TAX ALERT | August 25, 2022

Authored by RSM US LLP


On Aug. 19, 2022, the first lawsuit challenging California’s interpretation of P.L. 86-272 was filed by the American Catalog Mailers Association (ACMA). The suit, filed in the Superior Court of California, seeks to declare “invalid” Technical Advice Memorandum (TAM) 2022-01 and Franchise Tax Board (FTB) Guidance 1050. Both pieces of guidance set forth the state’s interpretation of the protections of P.L. 86-272 as they relate to internet-based activities and closely follow the guidance issued by the Multistate Tax Commission (MTC) in August of 2021. For additional information on P.L. 86-272 and the revised MTC guidance generally, please read our article MTC adopts new P.L. 86-272 guidance: What you need to know.

California TAM 2022-01 describes certain internet-based activities, such as placing cookies on customer computers, providing post-sale assistance through email or chat functions and accepting applications for employment online, among others, as activities that exceed the protections of P.L. 86-272. The list of unprotected activities in the TAM generally represent functionality and services associated with most modern websites and is widely applicable to taxpayers selling tangible products online. The ACMA suit asserts that the guidance is void under the Supremacy Clause of the U.S Constitution as a significant departure from prior interpretations of the protections afforded under federal law and is inconsistent with P.L. 86-272 itself. Further, ACMA asserts that the development and release of the new guidance did not comply with California’s Administrative Procedure Act, such as by providing notice and public comment.


The ACMA suit represents the first challenge to the new interpretations of P.L. 86-272 originating with the MTC guidance released in 2021, but it is unlikely to be the last. The broad list of internet-based activities covered in the MTC guidance and the recent California TAM leaves a very narrow set of circumstances and taxpayers to which the protections of P.L. 86-272 would apply, effectively overriding the protections originally established by federal law. In addition to California, New York has proposed regulations that would adopt the MTC guidance on P.L. 86-272, and revenue officials in New Jersey and Oregon have recently indicated that they intend to issue formal regulations adopting the MTC’s rules. For further information on the draft regulations in New York, please see our alert New York takes steps to follow revised MTC P.L. 86-272 guidance.

It is likely more states will adopt the MTC’s new interpretation of P.L. 86-272 in the future. Businesses and taxpayers should follow the California suit closely as it may influence tax policy and guidance adoption in other states. In an age where virtually all businesses have interactive websites, it is imperative to know which states are pursuing this approach to interpreting the protections of P.L. 86-272. Essentially, any internet activity beyond a static website – or one that merely allows for order taking – is likely to lose the protection of federal law. For more information on the MTC guidance and P.L. 86-272 protection in California or any other state, please consult your state and local tax adviser.

This article was written by Brian Kirkell, Anna Cronic, Mo Bell-Jacobs, David Brunori and originally appeared on 2022-08-25.
2022 RSM US LLP. All rights reserved.

The information contained herein is general in nature and based on authorities that are subject to change. RSM US LLP guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. RSM US LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein. This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer.

RSM US Alliance provides its members with access to resources of RSM US LLP. RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each are separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. Visit for more information regarding RSM US LLP and RSM International. The RSM(tm) brandmark is used under license by RSM US LLP. RSM US Alliance products and services are proprietary to RSM US LLP.

Dopkins & Company, LLP is a proud member of RSM US Alliance, a premier affiliation of independent accounting and consulting firms in the United States. RSM US Alliance provides our firm with access to resources of RSM US LLP, the leading provider of audit, tax and consulting services focused on the middle market. RSM US LLP is a licensed CPA firm and the U.S. member of RSM International, a global network of independent audit, tax and consulting firms with more than 43,000 people in over 120 countries.

Our membership in RSM US Alliance has elevated our capabilities in the marketplace, helping to differentiate our firm from the competition while allowing us to maintain our independence and entrepreneurial culture. We have access to a valuable peer network of like-sized firms as well as a broad range of tools, expertise, and technical resources.

For more information on how the Dopkins & Company, LLP can assist you, please call us at 716.634.8800.

For more information, contact

Dopkins Tax Advisory Group

Our tax professionals include specialists who are proactive, strategic thinkers who work to maximize your cash flow. In addition to cash flow considerations, we also believe that tax planning is most effective when it is integrated with, and fully supports, your business plan and personal goals. Our approach to tax planning will help you better understand the tax implications of any proposed course of action, and together we can make the right decisions for your business. Contact us via email link below for more information. for more information contact your Dopkins Client Service Coordinator or Gregory Urban at

Do What You Love.
Love What You Do.

It’s about balance. The variety and quality of the clients, along with access to the latest technology and business information keeps the work interesting.

Learn More
Three Dopkins Employees

Opportunity Awaits

Take your career to the next level at Dopkins

Learn more