New Jersey Tax Court Upheld Online Merchant Rules
New Jersey’s 2025 internet tax amendments survived a legal challenge that claimed they violated federal law.
Updated on Oct. 1, 2026 in Taxes
Live Poll
Should states be permitted to impose income taxes on out-of-state online retailers?
The New Jersey Tax Court has dismissed a lawsuit from the American Catalog Mailers Association regarding state income tax obligations for out-of-state online merchants. The ruling upholds regulations enacted in 2025 that expanded the scope of taxation for these businesses.
Why it matters
The court decided that New Jersey's current tax regulations for online sellers do not exceed state authority under federal law. This preserves the state's framework for applying income taxes to internet-based retailers.
The 2025 internet activities amendments remain in effect following the court's dismissal of the challenge. The ruling confirms the state's reach over online merchants despite claims that the rules conflicted with federal income tax protections.
The players
New Jersey Tax Court
The state judicial body responsible for resolving disputes between taxpayers and the New Jersey Division of Taxation regarding state tax liabilities.
American Catalog Mailers Association
A trade organization representing mail-order and online retail businesses concerned with state and federal tax policies.
The details
The American Catalog Mailers Association had argued that New Jersey's tax rules violated Public Law 86-272, which prevents states from taxing businesses that only solicit sales of tangible property. The Tax Court evaluated this claim against the state's 2025 amendments and found the regulations remain within the state's legal authority. This decision clarifies that the state's income tax expansion for out-of-state merchants stands as written.
Timeline
New Jersey enacted the internet activities tax amendments in 2025.
The New Jersey Tax Court issued its ruling on Thursday, October 1, 2026.
Money Landscape
This ruling settles a significant point of contention regarding Public Law 86-272 in an era of expanding state-level digital taxation. It follows a broader trend of states attempting to broaden their income tax reach to accommodate modern e-commerce models.
If you operate an out-of-state business selling to customers in New Jersey, the state’s current tax obligations remain enforceable. Consult with a tax professional to ensure your business remains in compliance with these validated 2025 standards.
The takeaway
The court has affirmed New Jersey's authority to tax online merchants under the 2025 framework. Business owners should review their current state tax filings to ensure compliance with the now-upheld regulations.
Further reading
For more information on state tax obligations, visit Taxes.
Source note: This article includes information reported by Bloombergtax.
Live Poll
Should states be permitted to impose income taxes on out-of-state online retailers?
