Online Sellers Sue Third State, NJ, Over Income Tax Expansion

The New Jersey tax agency’s expansion of income tax obligations to out-of-state online merchants “amounts to a refusal by the Division to respect federal law,” a trade group alleges in a state tax court complaint.

Only Congress can update 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 American Catalog Mailers Association told the New Jersey Tax Court.

The association, which is rebranding as the American Commerce Marketing Association, wants the court to strike down the internet activities amendments that the ...