NY Income Tax Expansion to Online Activity Survives Legal Attack

Federal law doesn’t preempt New York’s additional income tax obligations on out-of-state online retailers, a state appeals court ruled Thursday.

The American Catalog Mailers Association asked the New York Supreme Court, Appellate Division, Third Department, to overturn a 2025 trial court ruling upholding the state’s regulation expanding the reach of its income tax. The group argued that the rule runs afoul of 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.

The group didn’t show that the regulation as written “revokes ...