How New State Tax Rules Are Increasing Risk for CPG and F&B Companies

Consumer packaged goods (CPG) and food & beverage (F&B) companies are entering a period of heightened state and local tax (SALT) risk. As states modernize their interpretation of long‑standing tax rules, more routine business activities, particularly digital interactions, may now create income tax obligations in states where companies previously assumed they were protected.

This shift is especially important for brands with multistate distribution, direct‑to‑consumer channels, or digitally driven customer engagement. What once fell squarely within “normal solicitation activity” may now be treated as taxable presence.

At the center of the shift is how states are reinterpreting Public Law 86‑272 (PL 86-272), a long-standing federal statute that historically limited the applicability of state income tax for out-of-state sellers whose only in-state activity relates to sale solicitations. For decades, the interpretation of PL 86-272 allowed many CPG and F&B companies to physically solicit sales nationwide without creating a taxable presence in every state.  However, the law was written decades before e-commerce, digital marketing, and third-party marketplaces, and states are now signaling a broader view of what constitutes a taxable presence, particularly with respect to the technologies companies are utilizing as part of their daily operations.  They argue that these modern activities go well beyond “solicitation,” and several have already taken formal steps to redefine the boundaries.

For businesses operating in this sector, the implications are clear: now is the time to review in-state activities and understand the new potential tax risks associated with remote selling.

Why This Matters Now

In recent years, states, including California, New York, New Jersey, and Massachusetts, have formally adopted new regulations narrowing the scope of protected activities under PL 86-272. This comes at a moment when CPG and F&B companies have leveraged their digital presence and online engagement as core channels of their business and sales models.

Activities once viewed as incidental to selling, such as the use of cookies to gather customer preferences, interactive online tools, and offering extended warranties online, may now be viewed by states as meaningful in-state business activity that triggers significant income tax obligations.

A Patchwork of State Positions

Complicating matters, there is no single national standard dictating how states interpret PL 86‑272. As some states have already formally adopted updated rules limiting the mere solicitation exemption, others are taking a wait-and-see approach. This lack of uniformity makes compliance difficult. For example, two companies with similar footprints and customers could face entirely different SALT outcomes based solely on:

• Where do their customers live?
• How do they leverage digital platforms, including their website, to interact with their customers?
• What technology do they use?
• Which activities are present in each state?

For CPG and F&B companies that rely on multiple channels, such as wholesale distribution, direct-to-consumer, digital marketing, and third-party marketplaces, this variability creates a complex compliance environment that demands proactive attention.

Key Risk Areas for CPG and F&B Companies

For businesses that operate in multiple states, the following are key areas to consider:

1. Digital and Customer Data-Driven Activities
   States are examining whether services such as customer analytics and digital engagement platforms cross the line from solicitation into business activity and contribute to a taxable presence. Activities once considered supportive may now result in significant state tax exposure.
2. Fulfillment and Marketplaces
   The way orders are fulfilled, including third-party marketplaces, can no longer be assumed “safe” simply because fulfillment occurs outside the state.
3. Online Job Applications
   Allowing candidates to apply online for in‑state, non‑sales roles (e.g., marketing, operations) may be interpreted as engaging in business activity in that state and inadvertently drive tax exposure.

Strategic Steps Companies Can Take
to Manage Risk

To stay ahead of this shift in PL 86-272 interpretation, multistate CPG and F&B companies should be cautious, yet proactive by considering implementing some of the following practical measures:

• Conducting a comprehensive PL 86-272 risk assessment across all states where they sell, distribute, or interact with customers.
• Reviewing digital and online activities to identify where states may view their presence as exceeding PL 86‑272 protection.
• Performing a multistate nexus study to confirm compliance with new state tax standards.
• Incorporating cross-function training to educate digital, sales, HR, and IT teams so their use of new approaches or platforms doesn’t inadvertently create tax exposure.

Taking these steps now can help CPG and F&B companies reduce uncertainty, minimize audit exposure, and ensure their SALT strategies are keeping pace with the evolving regulatory environment.

Take Our SALT Nexus and PL 86-272 Assessments!

To help CPG and F&B companies better understand their SALT position, Anchin has developed comprehensive SALT Nexus and PL 86-272 Assessments. These tools are designed to identify potential areas of exposure tied to current state nexus interpretations and the narrowed scope of PL 86‑272 protections.

Take the assessments today and gain insight into how recent developments may affect your tax position, before the states do.

For more information on PL 86-272 and its impact on CPG and F&B businesses, please contact Alan Goldenberg, Principal and Leader of the State and Local Taxation (SALT) and Tax Controversy groups, or your Anchin Relationship Partner.