By: Matthew Laney | 11/19/25
Historically, Massachusetts adhered closely to the federal interpretation of Public Law 86-272, a 1959 statute that restricts states from imposing a net income tax on businesses whose in-state activities are limited to the solicitation of orders for tangible personal property. The Massachusetts Department of Revenue (DOR) relied on precedent set by the U.S. Supreme Court in Wisconsin Department of Revenue v. William Wrigley Jr. Co. (1992), which established that protection under the law applies only if a company’s in-state activities are “entirely ancillary” to soliciting orders.
Under prior regulations, a company without physical presence in Massachusetts was typically shielded from corporate income tax obligations if it confined its in-state operations to sales solicitation. Activities like accepting orders outside the state or delivering goods via common carrier were considered Public Law 86-272 protected activities, ensuring immunity from corporate excise tax.
However, as business transactions increasingly moved online, states began re-examining how digital interactions, such as maintaining websites or tracking customer behavior, would fit within this decades-old framework. Massachusetts, like many other jurisdictions, recognized that digital commerce created new forms of in-state engagement not contemplated in 1959.
In early 2025, the Massachusetts Department of Revenue (DOR) proposed amendments to its corporate excise tax nexus regulation, 830 CMR 63.39.1, marking a major development in the state’s interpretation of Public Law 86-272. The revised regulation closely follows the Multistate Tax Commission’s (MTC) 2021 guidance, which expanded how states may treat internet-based business activities. The amendment modernizes Massachusetts’ approach by addressing digital practices that go beyond the traditional “solicitation of orders” standard.
The amendment to subsection (4)(e) specifically clarifies that protection under Public Law 86-272 applies only when an out-of-state corporation’s in-state activities are strictly limited to soliciting orders for tangible personal property, with orders approved and fulfilled entirely outside Massachusetts. The new language makes clear that the law’s protection does not apply to corporations that place Internet cookies onto the computers or other electronic devices of in-state customers that gather customer search information used to adjust production schedules and inventory amounts, develop new products, or identify new items to offer for sale.
Finally, the DOR reaffirmed that corporations with more than $500,000 in Massachusetts sales and unprotected in-state activities are subject to the net income measure of the corporate excise tax. The regulation also reiterates that the federal law’s protection applies only to the income measure, not to the non-income or minimum excise components of the tax. Together, these changes signal Massachusetts’ commitment to updating its nexus standards in response to digital commerce and evolving tax policy trends.
The 2025 regulation carries significant implications for remote sellers, online retailers, and service providers. Businesses that rely on digital marketing, data analytics, or interactive websites may find that these functions create taxable presence in Massachusetts.
For example, an online retailer placing cookies on Massachusetts customers’ devices to monitor browsing patterns or tailor advertising may now be viewed as performing an unprotected in-state activity. Similarly, businesses tracking user data for research and development could fall outside the boundaries of Public Law 86-272 protection.
Given the rise of internet-based sales and remote business models, many companies previously exempt under the traditional interpretation may now have to register, file, and pay Massachusetts corporate income tax. The new rule also increases audit risk for those unaware of their expanded nexus footprint.
Businesses should act promptly to assess how these changes affect their Massachusetts tax obligations. The following steps can help companies manage risk and maintain compliance:
Massachusetts joins a growing list of states interpreting Public Law 86-272 through a modern, digital lens. California, New Jersey, and New York have each advanced similar policies, though their approaches vary.
Compared to these states, Massachusetts has taken a cautious but clear stance. Its regulation explicitly references internet activities such as cookies and online data collection, aligning with the MTC’s framework but leaving room for future expansion.
This trend underscores the gradual erosion of the statute’s original protections as states adapt to the realities of e-commerce. Businesses with multistate operations should expect more jurisdictions to issue similar updates in the near future.
The Massachusetts Department of Revenue’s updated regulation went into effect on October 10, 2025.
Non-compliance could result in assessments for unpaid corporate excise tax, interest, and penalties. Massachusetts may also impose additional sanctions for failure to file or underreporting taxable income linked to unprotected in-state activities.
The updated regulation pertains specifically to Massachusetts’ corporate excise tax, not sales tax. However, businesses triggering nexus under the new interpretation may also need to evaluate their sales tax collection responsibilities under existing economic nexus thresholds.
Online activities such as placing cookies on Massachusetts users’ devices to collect data, using that data for business functions like inventory or product development, and engaging in post-sale customer interactions are no longer protected under Public Law 86-272. The state now classifies these digital activities as non-ancillary to solicitation, making them subject to Massachusetts corporate excise tax nexus.
As digital commerce continues to redefine state tax boundaries, Massachusetts’ action represents another step toward modernizing outdated federal protections. Businesses engaging in online sales or customer interactions should reassess their nexus positions and proactively adjust compliance strategies.
With proper planning, companies can navigate the evolving Massachusetts tax landscape while minimizing exposure and ensuring continued compliance. For organizations seeking professional guidance, Bennett Thrasher’s state and local tax professionals can provide tailored strategies for managing nexus, corporate excise tax, and related compliance obligations.
Matthew Laney
Bennett Thrasher LLP
Phone: (770) 396-2200
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