Answer:
Public Law 86-272, enacted in 1959, established limitations on states' ability to tax out-of-state businesses based solely on their solicitation of sales activities within the state. However, changes in the U.S. economy over time have made this law partially obsolete. Two significant factors that have contributed to this obsolescence are the rise of e-commerce and the shift towards a service-based economy.
With the advent of e-commerce, companies can conduct business across state lines without a physical presence in a particular state. This has made it more challenging to determine the extent of a company's activities within a state and has blurred the lines of physical nexus that Public Law 86-272 sought to protect. As a result, states have sought ways to update their tax laws to capture revenue from online sales, leading to limitations in the applicability of Public Law 86-272.
Additionally, the shift towards a service-based economy has seen a decrease in the significance of physical product sales as a primary revenue stream for many companies. Public Law 86-272 primarily applies to companies engaged in the solicitation of sales for tangible personal property. However, service-based companies often have different revenue models, making the law less relevant for them.
An example of a company for which Public Law 86-272 works well is a traditional brick-and-mortar retail store that operates exclusively within one state. Such a company engages in physical product sales and solicits sales activities within its state of operation. Public Law 86-272 provides protection against being subjected to additional taxation from other states solely based on these activities.
On the other hand, an example of a company for which Public Law 86-272 does not work well is an e-commerce platform that sells products nationwide. Since the company conducts business across state lines without a physical presence in each state, it becomes more challenging for states to apply the limitations of Public Law 86-272 effectively. As a result, states may seek alternative ways to tax the company's online sales activities.
In summary, changes in the U.S. economy, such as the rise of e-commerce and the shift towards a service-based economy, have made Public Law 86-272 partially obsolete. While the law may still be relevant for traditional brick-and-mortar retail companies, it becomes less applicable to e-commerce platforms and service-based companies operating in multiple states.
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