New York Judges Consider Legality of State Income Tax Expansion

A New York appellate panel posed few questions during an oral argument Wednesday over whether federal law preempts New York’s additional income tax obligations on out-of-state online retailers.

The American Catalog Mailers Association wants the New York Supreme Court, Appellate Division, Third Department, to overturn an April trial court ruling upholding the state’s regulation expanding the reach of its income tax. They argue 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 ACMA has actively ...