FBA Inventory and State Income Tax: Why P.L. 86-272 Does Not Cover Units Amazon Ships From Inside the State

By Bernardo Campelo, Forbes Business Council E-Commerce Leader, Amazon SPN Certified provider, Amazon SP-API authorized partner, and Founder of PrepVia.

As of October 29, 2026, the federal law that keeps many out-of-state sellers out of state income tax, Public Law 86-272, still reads the way Congress wrote it in 1959. 15 U.S.C. 381 bars a state from imposing a net income tax only when the seller's in-state activity is limited to soliciting orders for tangible goods that are approved outside the state and "filled by shipment or delivery from a point outside the State." A unit that Amazon ships to a buyer from a fulfillment center inside the buyer's state does not leave from a point outside the state.

The states that have adopted the Multistate Tax Commission's statement on P.L. 86-272 read it the same way, and they say so in writing. The MTC's revised statement on P.L. 86-272 uses the FBA case as an example: when a marketplace keeps a seller's products in fulfillment centers in a state, the seller loses P.L. 86-272 protection in that state. Amazon collecting sales tax at checkout does not touch any of this. Amazon's own help pages say it does not file income or gross receipts taxes for the seller.

This guide is for the CFO, controller and CPA of a brand that ships into FBA. It separates the statute, the states' written position, the court decisions and the taxes outside P.L. 86-272. It is not tax advice: take your facts and this list to your CPA before you change a filing position.

Every date and name below was checked on October 29, 2026 against the US Code, Congress's bill records on govinfo, the Multistate Tax Commission, state statutes, regulations and revenue departments, court and tax appeals decisions, and Amazon's Seller Central help pages, linked where they first appear. State positions on P.L. 86-272 are being litigated, and New York's case may go further on appeal.

What P.L. 86-272 Actually Protects

The statute is short. Under 15 U.S.C. 381(a), a state cannot impose a net income tax on income from interstate commerce when the seller's business activities in the state go no further than "the solicitation of orders by such person, or his representative, in such State for sales of tangible personal property, which orders are sent outside the State for approval or rejection, and, if approved, are filled by shipment or delivery from a point outside the State." Three conditions sit in that sentence: the product is tangible, the order is approved outside the state, and the goods ship from outside the state.

Two limits matter for anyone planning around it. First, the protection covers net income tax only. Under 15 U.S.C. 383, that means any tax "imposed on, or measured by, net income," so a franchise or privilege tax measured by net income is covered. A tax measured by gross receipts is not, and Texas says the same of its margin-based franchise tax. Second, subsection (b) says the protection does not apply in the state where the corporation is incorporated, or, for an individual taxpayer, in the state where that person is domiciled or resident.

The Supreme Court read the phrase "solicitation of orders" in Wisconsin Department of Revenue v. William Wrigley, Jr., Co., 505 U.S. 214 (1992). There, the Court held that the phrase covers activities that are entirely ancillary to requests for purchases, those that serve no independent business function apart from soliciting orders. Storing goods so they can be delivered from inside the state is not a request to buy. It is fulfillment.

The right-hand column is our reading, not a ruling.

Why FBA Inventory Falls Outside the Statute

The plain reading above is not only ours. The Multistate Tax Commission, the intergovernmental agency that coordinates state tax policy, adopted the fourth revision of its Statement of Information Concerning Practices of Multistate Tax Commission and Supporting States Under Public Law 86-272 on August 4, 2021. Its example 9 is the FBA case almost word for word: a business sells through a marketplace facilitator that "maintains inventory, including some of the business's products, at fulfillment centers in various states where the business's customers are located." The statement concludes: "This maintenance of the business's products defeats the business's P.L. 86-272 immunity in those states where the fulfillment centers are located."

The same statement lists activities that are not protected. The list includes owning, leasing, using or maintaining a "Warehouse" or a "Stock of goods other than samples for sales personnel or that are used entirely ancillary to solicitation." Article V adds that a stock of goods kept in the state by an independent contractor, "under consignment or any other type of arrangement with the business, except for purposes of display and solicitation, removes the protection." So does a contractor accepting returns on the seller's behalf.

Read together, those lines cover more than Amazon. A prep center or 3PL that holds your inventory in its state is also a stock of goods in that state. That includes a prep center in Florida, such as ours in Miami. Inventory outside your home state, in any warehouse, is the fact those states look at.

The statement speaks only for "Supporting States," which it defines as a state that "adopts or otherwise expressly indicates support for this Statement by legislation, regulation or other administrative action." It is guidance, not federal law. It also treats the reasoning of South Dakota v. Wayfair (2018) on virtual contacts as relevant, which matters for website activity. For FBA, the physical inventory settles the point without Wayfair.

What States and Courts Have Done With It

Each item below comes from the state's own source, and the pattern is not uniform.

• New York. New York implements P.L. 86-272 through 20 NYCRR 1-2.10, which includes rules on internet activity. On May 7, 2026, the Appellate Division, Third Department, affirmed that the regulation is not preempted by federal law in American Catalog Mailers Assn. v. Department of Taxation & Finance, 2026 NY Slip Op 02908. The court ruled on the regulation as written. It said applied questions, "including whether a particular corporation's activities fall within or outside the immunity conferred by Public Law 86-272," were not before it. The decision can still be appealed, so check its status with your CPA.
• California. California's Office of Tax Appeals looked at FBA sellers directly. In Appeal of Diet Standards LLC (issued October 7, 2025), a Delaware LLC based in Florida that owned inventory in Amazon's California fulfillment centers was found to be doing business in California for the 2019 tax year, "even though its inventory and sales were below the threshold amounts," and owed the $800 annual LLC tax. The seller had estimated California sales of $13,998 and maximum California inventory of $2,333. In Appeal of Fishbone Apparel, Inc. (issued December 29, 2025), a Pennsylvania-based corporation using FBA was found required to file a California return and pay the $800 minimum tax for 2019. Both opinions are marked nonprecedential, and neither one turns on P.L. 86-272: they apply California's "doing business" test.
• Pennsylvania. The answer is not the same everywhere. In Online Merchants Guild v. Hassell (filed September 9, 2022), Pennsylvania's Commonwealth Court held that the Department of Revenue had not shown that out-of-state FBA sellers, whose connections to the Commonwealth "were only shown to be limited to the storage of merchandise by Amazon in one of Amazon's Pennsylvania warehouses," had enough contact to be required to collect sales tax or pay personal income tax. The case rests on due process, not on P.L. 86-272, and it did not decide Pennsylvania's corporate net income tax.

P.L. 86-272 does not protect FBA inventory. Whether a particular state can and does tax you is a separate question of that state's statute, its nexus rules and your facts.

Which State Taxes the Shield Reaches

P.L. 86-272 reaches taxes imposed on, or measured by, net income, whatever the state calls them. For state taxes measured by something other than net income, such as gross receipts, the federal shield is not in play, whatever the seller does.

Texas imposes a franchise tax measured by margin. Its nexus rule, 34 TAC §3.586, is direct (full text in the November 14, 2025 Texas Register, adopted without changes): "Public Law 86-272 (15 United States Code §§381 - 384) does not apply to the Texas franchise tax." The same rule lists, as physical presence, "having an inventory in Texas or having spot inventory for the convenient delivery to customers, even if the bulk of orders are filled from out of state" and "sending materials to Texas to be stored awaiting orders for their shipment." Separately, a foreign entity has economic nexus with "gross receipts from business done in Texas of $500,000 or more." An amendment to the rule was adopted without changes, effective January 7, 2026.

Ohio levies a Commercial Activity Tax on taxable gross receipts "for the privilege of doing business in this state." Ohio Revised Code 5751.02 says the tax "is not a transactional tax and is not subject to Public Law No. 86-272, 73 Stat. 555." The version of the section on the state's site is effective June 15, 2026.

Florida, where many brands prep, is sometimes described as if it had no income tax at all. For corporations it does. The Florida Department of Revenue says its corporate income/franchise tax "is imposed on all corporations for the privilege of conducting business, deriving income, or existing within Florida," and that an LLC classified as a corporation for Florida and federal income tax purposes "must file a Florida corporate income/franchise tax return." That tax is measured by income, so P.L. 86-272 governs it, and the question is again whether your goods sit in Florida, including at a prep center. How a pass-through owner is treated is a separate question for your CPA.

States we could not check at the source are left out; absence says nothing about their position.

Sales Tax Collection Is Not Income Tax Compliance

Amazon calculates, collects and remits sales tax on the orders it facilitates, and every US state with a sales tax now has a marketplace facilitator law. Amazon's US Marketplace Tax and Regulatory Fee Collection FAQ says: "All US States with a sales and use tax have enacted MPF/MTC laws as of January 1, 2023." On that page, "MTC" is Amazon's term for Marketplace Tax Collection, not the Multistate Tax Commission.

The same page draws the line that matters for this post: "Amazon is only responsible for taxes and fees under MTC law. Amazon is not responsible for filing taxes on your behalf, including any income or gross receipts taxes that may be due on your sales into a state." The sales tax on the order is handled in nearly every state, with local exceptions Amazon lists on the same page. The income, franchise and gross receipts side of the same sale is yours.

The sales tax side of stored inventory has its own rules on registration, zero returns and channels Amazon does not touch. We cover those in Sales Tax Nexus When Your Inventory Sits in Florida, so this guide does not repeat them.

"Moving your prep to a 'tax-free' state does not move your inventory out of Amazon's network. For income tax, start with the states where Amazon holds your units, add the state where your prep center sits, and take that list to your CPA."

Bernardo Campelo, Founder of PrepVia

Finding the States Where Your Units Sit

A CPA cannot assess exposure without a list of where inventory was, and when. For FBA, Amazon's Inventory Ledger report is the record. Amazon describes it as a report that shows starting balance, every movement and ending balance, and says: "You can view up to 18 months of historical inventory data in this report."

Two views matter. The detailed view "shows details about all inventory events in fulfillment centers, including event type, quantity, location, country, and disposition." The summary view lets you aggregate by location: "select Country to display inventory location by country or Fulfillment center to display inventory location by fulfillment center." The report identifies fulfillment centers, not states, so someone on your team still has to map each fulfillment center to its state for the CPA.

A year-end workflow:

• Pull the summary view by fulfillment center for each month of the tax year, so you can see which centers held units. Under the MTC statement, an unprotected activity at any point in a tax year removes the protection for that whole year.
• Map each fulfillment center to a state, and keep the mapping with the workpapers, because it is the bridge between Amazon's data and a state filing analysis.
• Add every location outside the FBA network: prep centers, 3PLs, Amazon's AWD and any other warehouse holding your goods. Each is a stock of goods in its state under the MTC statement.
• Note your entity type and home state, since P.L. 86-272 never applies in the state where a corporation is incorporated, or where an individual taxpayer is domiciled or resident.
• Mark the taxes outside P.L. 86-272 in each state on the list, such as the Texas margin-based franchise tax and the Ohio CAT, because the shield question does not even arise there.

Export the data before it ages out of the 18-month window.

Past Exposure and What Congress Has Not Changed

Sellers who find years of unfiled states have a structured path. The MTC's Multistate Voluntary Disclosure Program lets a taxpayer negotiate with several states through one process. Per the MTC: "There is no charge to the taxpayer for participation in the MVDP." Sales and use tax and income or franchise tax "are the tax types generally subject to a voluntary disclosure agreement." The taxpayer's identity is disclosed to a state "only after the applicant has entered into a VDA with that state."

The program has conditions your CPA will weigh. "Prior contact between a state and the taxpayer concerning a tax type disqualifies the taxpayer from participation in voluntary disclosure for that tax type," and contact includes filing a return, paying tax or receiving an inquiry. The state waives penalties for the lookback period, but "Interest is due on unpaid tax obligations incurred during the look-back period unless expressly waived by the state."

In 2017 the MTC ran a special initiative for online-marketplace sellers that "may have nexus in states as a result of having their inventory stored in the states by a marketplace facilitator," and about 850 sellers applied. That window closed in 2017. Today's route is the standing program.

On the federal side, nothing has changed the statute. Two bills in the current Congress, H.R. 427 and S. 3027, the Interstate Commerce Simplification Act of 2025, would define "solicitation of orders" as "any business activity that facilitates the solicitation of orders even if that activity may also serve some independently valuable business function apart from solicitation." Congress's records show both were referred to committee in 2025, with no later action. A version of the same language passed the House inside H.R. 1 in 2025, but it is not in the law that was enacted, Public Law 119-21. On our reading of the bill text, it would change the definition of solicitation, not the requirement that orders be filled from outside the state.

Where a Prep Center Fits

A prep center does not decide where Amazon stores your units, and it does not decide your tax position. What it controls is the leg before Amazon: your goods sit in its building between receiving and the outbound shipment, which makes that building one of the locations on your list. For a CFO, the useful questions are factual.

• Where is the warehouse? PrepVia's is at 8507 NW 72nd St, Miami, FL 33166, so inventory we hold is in Florida, and that belongs on the list you give your CPA.
• How long does inventory stay? Our prep window is 24-36 hours. Inventory that waits longer is still in the state while it waits.
• What records come back? Receiving and inspection are included, and discrepancies are reported within 24 hours of arrival, with photos. Dated receiving records tie a carton to a state.
• Who answers the tax question? Not the prep center. A licensed CPA or state tax adviser does, using your entity, home state, inventory locations and channels.

Your inventory ends up in Amazon's network wherever you prep, so most of the states on your list come from Amazon, and the prep center's state is one more line on it.

Frequently Asked Questions

Does P.L. 86-272 protect FBA sellers from state income tax?

Not for inventory Amazon ships from inside a state. 15 U.S.C. 381 protects only orders "filled by shipment or delivery from a point outside the State," and the MTC's 2021 statement says inventory in a marketplace's in-state fulfillment centers "defeats the business's P.L. 86-272 immunity" in those states. Whether a state then taxes you depends on its own law and your facts.

If Amazon collects sales tax on my orders, is my state tax handled?

Only the sales tax on the orders Amazon facilitates. Amazon's help page says it "is not responsible for filing taxes on your behalf, including any income or gross receipts taxes that may be due on your sales into a state."

Does a small amount of FBA inventory matter?

It can. In two 2025 decisions, California's Office of Tax Appeals found FBA sellers doing business in California for 2019 with sales below the state's bright-line thresholds, and upheld the $800 annual tax in each. Those decisions are nonprecedential, and other states apply their own tests.

Are there state taxes P.L. 86-272 does not cover at all?

Yes. It covers taxes imposed on, or measured by, net income, including franchise taxes measured by net income. Taxes measured by gross receipts or margin are outside it: Texas says P.L. 86-272 does not apply to its margin-based franchise tax, and Ohio says its Commercial Activity Tax is not subject to it.

How do I find which states hold my FBA inventory?

Use the Inventory Ledger report. The summary view can aggregate by fulfillment center, and the detailed view shows the location of each inventory event, with up to 18 months of history. You then map each fulfillment center to its state.

What can I do about past years?

Ask your CPA about the MTC's Multistate Voluntary Disclosure Program. It has no charge, keeps your identity confidential until you sign with a state, and is closed for a tax type if you have already had contact with the state about it, including filing a return, paying tax or receiving an inquiry.

Final Take

The statute has said the same thing since 1959: the shield covers orders filled from outside the state. FBA puts your units inside the state, and the states that follow the MTC statement have written down that this ends the protection there. Decisions on what follows differ by state, by tax and by the record in each case.

The work for a finance team is concrete. Build the list of every place your inventory sat, from the Inventory Ledger and your 3PL records, note the taxes outside P.L. 86-272 in each state, and bring it to your CPA. That conversation, with every location on the list, decides what you owe.