Justices Asked to Broaden Federal Protections from State Tax

State and Local Tax (SALT) Team Co-Leader Jennifer Karpchuk was interviewed for a Bloomberg Tax article about a travel software company's petition to the U.S. Supreme Court to hear a dispute over the applicability of Public Law (PL) 86-272 to service offerings. PL 86-272 prevents states from imposing income taxes on out-of-state businesses whose only activity in a state is to solicit sales for tangible personal property. The case arose when a Florida-based company facing Wisconsin state income tax charges sued Wisconsin's revenue department, contending PL 86-272's protections extend to services such as the software solutions it provides. A Wisconsin appeals court ruled against the company in 2025, finding that the federal law only applies to orders for tangible personal property and explicitly does not cover services. Ms. Karpchuk noted the statute's silence on services could either indicate legislative intent to limit its scope or simply reflect that times – and the economy – have changed. She told Bloomberg Tax to expect continued litigation over PL 86-272, given that many digital products blur the lines between goods and services, but cautioned that the Supreme Court historically has shown little interest in state tax cases, let alone ones involving this particular law.

"Since 1959, the Court has only addressed Public Law 86-272 twice – and it has been almost 35 years since it last did so," she said.

READ: Justices Asked to Broaden Federal Protections from State Tax (Subscription required)