Our solutions are tailored to each client’s strategic business drivers, technologies, corporate structure, and culture.
10/20/2025
Massachusetts incorporates new restriction on P.L. 86–272
Massachusetts has revised its nexus regulation, limiting the protection businesses once had under PL 86-272.
On Oct.10, 2025, the Massachusetts Department of Revenue (DOR) revised Regulation 830 CMR 63. 39. 1. The DOR uses this regulation to explain nexus-creating activities in the state – activities that subject the business to the Massachusetts corporate excise tax (i.e., the state income tax). The regulation now limits businesses’ use of Federal Public Law (PL) 86-272 as protection against the taxation of their income. This new provision will subject otherwise protected companies to Massachusetts tax.
Deeper dive
Understanding the importance of this change requires a brief trip into the history of PL 86-272 and Massachusetts’ nexus regulation.
Federal PL 86-272
Congress enacted PL 86-272 in 1959. It protects sellers of tangible personal property from state income tax obligations when their in-state activities were limited to solicitation and the customer’s order was approved and fulfilled outside the state. In 1986, the Multistate Tax Commission (MTC), an intergovernmental tax agency, provided its first statement on the various activities that cause a business to lose protection under PL 86-272.
MTC revised the statement again in 2021 to add internet activities. Under the revised statement, an activity that exceeds protected solicitation includes when a business provides internet cookies to in-state businesses or individuals. Those cookies could be used for multiple reasons which MTC considers unrelated to solicitation of orders.
Massachusetts’ nexus regulation
On Oct. 18, 2019, the Massachusetts regulations stipulated that a business was presumed to have nexus with the state (subjecting it to the Massachusetts excise tax) if its Massachusetts gross receipts for the year exceeded $500,000. However, the regulations also included relief from an income tax if PL 86-272 applied.
The DOR’s 2019 nexus regulation reflected MTC’s 1986 guidance. Internet activities were not discussed as potential violations of PL 86-272. However, the latest regulatory change incorporates MTC’s 2021 guidance regarding Internet activities. Accordingly, if a business has over $500,000 in Massachusetts sales in a year and provides Internet cookies to customers in Massachusetts, it is subject to the Massachusetts income tax.
What does CohnReznick think?
States are increasing efforts to find new revenue sources, especially from nonresident businesses. The Massachusetts regulatory change is just an example of that. A yearly nexus analysis or update is critical to avoid potential traps and liabilities. This is especially important in states like Massachusetts, which have adopted MTC’s 2021 nexus guidance.
Close
Contact
Let’s start a conversation about your company’s strategic goals and vision for the future.
Please fill all required fields*
Please verify your information and check to see if all require fields have been filled in.
Related services
Receive CohnReznick insights and event invitations on topics relevant to your business and role.
Any advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues. Nor is it sufficient to avoid tax-related penalties. This has been prepared for information purposes and general guidance only and does not constitute legal or professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice specific to, among other things, your individual facts, circumstances and jurisdiction. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick, its partners, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.