AMERICAN CATALOG MAILERS ASSOCIATION V DIRECTOR, DIVISION OF TAXATION

NOT FOR PUBLICATION WITHOUT APPROVAL OF
THE TAX COURT COMMITTEE ON OPINIONS
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AMERICAN CATALOG MAILERS 	:
ASSOCIATION, 	: TAX COURT OF NEW JERSEY
: DOCKET NO: 010021-2025
Plaintiff, 	:
:
v. 	:
:
DIRECTOR, DIVISION OF TAXATION, :
:
Defendant. 	:
:
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Decided October 1, 2026.
Jamie M. Zug, and David Swetnam-Burland (Brann & Isaacson) of the
Maine bar, admitted pro hac vice, argued the cause for plaintiff (Law
Office of Jamie M. Zug, David Swetnam-Burland, Nathaniel A. Bessey
(Brann & Isaacson) of the Maine bar, admitted pro hac vice, and Martin
I. Eisenstein (Brann & Isaacson) of the Maine bar, admitted pro hac
vice, attorneys; Jamie M. Zug, Nathaniel A. Bessey, David Swetnam-
Burland and Martin I. Eisenstein, on the brief).
Anthony D. Tancini, Deputy Attorney General, argued the cause for
defendant (Jennifer Davenport, Attorney General, attorney; Anthony D.
Tancini, on the brief).
CIMINO, J.T.C.
I. 	INTRODUCTION
The American Catalog Mailers Association (ACMA) contends that federal
law preempts the Director, Division of Taxation’s regulations concerning interstate
internet sales. ACMA is a trade group whose members include out-of-state internet

2
sellers of tangible goods such as home audio and video products. Through the
internet, the sellers provide interactive technical support for the goods. The sellers
also place internet tracking cookies on potential and actual buyers’ computers. The
Director adopted regulations deeming interactive technical support and placing
internet cookies as in-state business activities. In-state business activities subject a
seller to state income taxation.
Under federal law, the Interstate Income Act, Pub. L. No. 86-272, 73 Stat. 555
(1959) (codified at 15 U.S.C. §§ 381 to 384) [hereinafter P.L. 86-272], out-of-state
sellers are not subject to state income taxation if the “business activities within such
State” are limited to the solicitation of tangible goods. P.L. 86-272 codifies the
common law drummer exception. A drummer is a specific type of itinerant
salesperson. The ACMA argues its members’ internet activities are analogous to
those performed by drummers. Thus, the ACMA asserts P.L. 86-272 preempts the
Director’s regulations.
The Director contends interactive technical support constitutes an in-state
business activity because the buyers receiving support are in-state. The ACMA
counters it constitutes an out-of-state business activity because the sellers providing
the support are located out-of-state. The court finds it is both. Since there is an in-
state component, taxation is permissible.

3
The Director also asserts placing internet cookies is an activity which takes
place in-state. Internet cookies are small packets of data placed on actual or potential
buyer’s computers to track certain activities including on-line shopping cart contents
and websites visited. The ACMA’s factual description of cookie implementation is
vague. The Director’s regulatory description of cookie implementation is not
congruent with the factual recitations in a multitude of judicial decisions. The court
is hesitant to rule upon the validity of the regulation without a showing of impact
upon anyone.
II. 	PROCEDURAL HISTORY
The Director promulgated regulations addressing certain internet transactions.
57 N.J.R. 1303(b) (June 16, 2025). The ACMA, on behalf of its members, filed a
declaratory judgment action challenging the regulations. The judicial branch can
review legislative or executive acts through a declaratory judgment action.1 See
N.J.S.A. 2A:16-50 to -62.
1 As to tax matters, declaratory judgment actions have considered statutes,
regulations and even letter rulings. American Trucking Ass’ns, Inc. v. Kline, 8 N.J.
Tax 181, 190-191 (Tax 1986) (constitutionality of statute), aff’d, 9 N.J. Tax 631
(App. Div. 1987); Exxon Corp. v. Hunt, 475 U.S. 355, 361 (1986), aff’g in part,
rev’g in part, 97 N.J. 526 (1984) (preemption of statute); Exxon Corp. v. Township
of East Brunswick, 192 N.J. Super. 329, 337 (App. Div. 1983) (challenge of
regulation); Labor Ready Northeast, Inc. v. Dir., Div. of Tax’n, 25 N.J. Tax 607,
612-13 (Tax 2011) (challenge to letter ruling); Rutgers Univ. Legis. Affairs Council,
Inc. v. Thompson, 12 N.J. Tax 642, 647 (Tax 1992) (challenge to letter ruling).

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The ACMA asserts that P.L. 86-272 preempts the regulations. When
Congress has spoken, and there is tension with a state enactment, the Supremacy
Clause of the United States Constitution provides the vehicle for resolving this
tension. The Supremacy Clause provides “[t]his Constitution, and the Laws of the
United States which shall be made in Pursuance thereof . . . shall be the supreme
Law of the Land; and the Judges in every State shall be bound thereby, any Thing in
the Constitution or Laws of any State to the Contrary notwithstanding.” 2 U.S.
Const., art. VI, cl. 2. The Supremacy Clause is not a source of rights. Instead, it
simply provides a rule of decision for courts to follow when federal and state law
are in conflict. Armstrong v. Exceptional Child Ctr., Inc., 575 U.S. 320, 324-25
(2015).
Both parties have moved for summary judgment. Our Supreme Court has
indicated that summary judgment provides a prompt business-like and appropriate
method of disposing of litigation where material facts are not in dispute. Brill v.
Guardian Life Ins. Co. of Am., 142 N.J. 520, 530 (1995). In most instances, the
filing of cross-motions signals the matter is appropriate for summary judgment.
Spring Creek Holding Co. v. Shinnihon U.S.A. Co., 399 N.J. Super. 158, 177 (App.
Div. 2008).
2 In addition, “all . . . judicial Officers . . . of the several States, shall be bound by
Oath or Affirmation, to support this Constitution.” U.S. Const. art. VI, cl. 3.

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III. LEGAL ANALYSIS
A. Introduction
The starting point for evaluating the interplay between P.L. 86-272 and the
Director’s regulations is the Commerce Clause of the United States Constitution.
The Commerce Clause gives Congress broad powers to regulate interstate
commerce. The clause provides “[t]he Congress shall have the Power . . . To regulate
Commerce . . . among the several States . . . .” U.S. Const. art. I, § 8, cl. 3.
The adoption of the Commerce Clause marked a sharp turnaround from the
sentiments expressed in the Declaration of Independence (U.S. 1776). ¶ 18. The
Declaration expressed disgust with Great Britain’s handling of trade with the
colonies.3 Ibid. Consequently, the states had little appetite for a strong central
government controlling commerce. “[A]s Free and Independent States, they [each]
ha[d] full Power to . . . establish Commerce . . .” Id. at ¶ 32. Ratified in 1781, the
Articles of Confederation gave the federal government very little control over
commerce. 1 The Documentary History of the Ratification of the Constitution 136
(Merrill Jensen ed., 1976) (ratification date).
Trade disputes soon arose between the states. Tariffs levied for commerce
through the ports of New York City and Philadelphia rendered New Jersey a “[c]ask
3 In fact, this grievance was listed before taxation without representation. Id. at ¶
19.

6
tapped at both ends.” 4 James Madison, in his Preface to Debates in the Convention
of 1787, 3 The Records of the Federal Convention of 1787 542 (Max Farrand ed.,
1911). New Jersey convention commissioners attended a 1786 convention in
Annapolis, Maryland limited to resolving trade disputes. Jensen at 181. While the
convention was not a success, the New Jersey commissioners urged an expanded
follow-up convention to include other topics. Id. at 183-84.
A 1787 convention convened in Philadelphia with commissioners having an
expanded mandate beyond commerce. Having everything on the table facilitated
negotiations for a strong central government with extensive powers over trade and
commerce. See Ibid. As succinctly explained by the United States Supreme Court:
These “few simple words [of the Commerce Clause] . . .
reflected a central concern of the Framers that was an
immediate reason for calling the Constitutional
Convention: the conviction that in order to succeed, the
new Union would have to avoid the tendencies toward
economic Balkanization that had plagued relations among
the Colonies and later among the States under the Articles
of Confederation.”
[Comptroller v. Wynne, 575 U.S. 542, 548 (2015)
(quoting Hughes v. Oklahoma, 441 U.S. 322, 325-26
(1979)).]
4 While some sources attribute a similar sentiment to Benjamin Franklin, no
evidence of Franklin uttering such a statement exists. Miriam V. Studley, 18 New
Jersey Historical Series 1 (1964).

7
In summary, a major impetus for adopting our constitutional system was commerce
and trade.
The Commerce Clause contains both a power and a prohibition. The explicit
words confer upon Congress the power to affirmatively regulate interstate
commerce. The clause does not mandate Congress to act. When Congress does not
act, the negative or dormant Commerce Clause prohibits states from “discriminating
between transactions on the basis of some interstate element.” Wynne, 575 U.S. at
549 (quoting Bos. Stock Exch. v. State Tax Comm’n, 429 U.S. 318, 332 n.12
(1977)).
The dormant clause is not explicitly written into the Constitution. Rather, the
dormant clause reflects a judicial concept found in interpreting the actual words of
the Commerce Clause. 5 Oklahoma Tax Comm'n v. Jefferson Lines, Inc., 514 U.S.
175, 179-80 (1995). It is essential to the overall interpretation of the Commerce
Clause. Ibid. The concept dates back to 1824. See Gibbons v. Ogden, 22 U.S. 1,
209 (1824).
Congress has been slow to exercise its affirmative powers under the
Commerce Clause, especially regarding taxation. It did not explicitly restrict state
5 The existence of the dormant Commerce Clause has not gone unquestioned by
some members of the Court. Wynne, 575 U.S. at 549.

8
taxation until enacting P.L. 86-272 in 1959.6 Yet, inaction by Congress has not
sapped the Commerce Clause of vitality. Over some two hundred years, the United
States Supreme Court has not hesitated to find the dormant clause precludes
discrimination between intra- and inter-state transactions.
Initially, the Court espoused a “free trade” view of the dormant Commerce
Clause. The Court declared “[i]nterstate commerce cannot be taxed at all . . . .”
Robbins v. Taxing Dist., 120 U.S. 489, 497 (1887). See also Complete Auto Transit,
Inc. v. Brady, 430 U.S. 274, 278 (1977). This is a physical presence standard. The
Court prohibited states from taxing goods in interstate commerce (i.e., from out-of-
state) unless the seller was physically present in the state in some way.7
Over the years, the Court’s standard to establish substantial nexus to impose
taxation has varied. The standard has oscillated between physical presence and
6 Previously the Supreme Court held regulations authorized under the Tariff Act of
1930 which restricted state taxation were a valid exercise under the Foreign
Commerce Clause. McGoldrick v. Gulf Oil Corp., 309 U.S. 414 (1940). Also, the
McCarran-Ferguson Act allowed per the Commerce Clause, expanded state taxation
powers. Prudential Ins. Co. v. Benjamin, 328 U.S. 408 (1946).
7 While grounded in physical presence, the early tests look to the direct and indirect
burden upon commerce. This approach is regarded as “a conceptual and unrealistic
mode of judicial thought [giving] very little consideration to the practical question
of economic burden of the tax.” Paul J. Hartman, State Taxation of Interstate
Commerce 31-32 (1953). The test was seen as “a judicial passport to the privileged
sanctuary of tax immunity.” Paul J. Hartman, State Taxation of Interstate
Commerce: A Survey and an Appraisal, 46 Va. L. Rev. 1051, 1073 (1960). “This
arid distinction between direct and indirect burdens allowed very little coherent,
trustworthy guidance as to tax validity.” Wynne, 575 U.S. at 552.

9
economic activity standards. Under a physical presence standard, the seller either
had to be located in the taxing state or have some sort of physical presence in the
state. Under the economic activity standard, physical presence did not matter so
long as the seller derived an economic benefit from the state. The current standard
is economic activity.
B. The rise of the peddler/drummer distinction.
The physical presence standard worked well when transportation and
communications were slow. The post-Civil War period saw a rapid expansion of
railroad transportation and telegraph communications. Walter A. Friedman, Birth
of a Salesman: the Transformation of Selling in America 56-57 (2004). Traveling
to visit customers and placing orders back to the home office, now took hours instead
of days. Id. at 59. These advances fostered a proliferation of interstate traveling
solicitors. Ibid. Local merchants and wholesalers soon complained that these
solicitors paid no taxes. Robbins, 120 U.S. at 498. Local and state governments
imposed taxes, and the Commerce Clause was raised as a defense. Id. at 492.
Arising from challenges of these taxes were a series of cases commonly referred to
as the drummer cases. Bonnier Corp. v. Jersey Cape Yacht Sales, Inc., 416 N.J.
Super. 436, 441 (App. Div. 2010).
The courts separated the solicitors into two categories – peddlers and
drummers. A peddler is one who carries goods for immediate delivery. Comment,

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Taxation of Itinerant Salesmen, 40 Yale L.J. 1094 (1931). Sales from a peddler are
“essentially [an] intrastate process whether a retailer operates from a fixed location
or from a wagon.” Memphis Steam Laundry Cleaner, Inc. v. Stone, 342 U.S. 389,
394 (1952) (emphasis added). Peddler sales have long been considered taxable.
Howe Mach. Co. v. Gage, 100 U.S. 676 (1879).
On the other hand, a drummer is one who sells with or without samples of
goods for future delivery via interstate commerce. 40 Yale L.J. at 1094-95.
Drummers sold retail goods door-to-door to households or travelled a circuit selling
wholesale to stores and shops. Brennan v. City of Titusville, 153 U.S. 289, 290
(1894); Friedman at 95. Obviously, drummers were physically present in the taxing
state. Nevertheless, the Supreme Court carved out a drummer exception to the
physical presence standard. The exception applied if the only in-state activity
consisted of solicitation or advertising, and the orders were sent to an out-of-state
home office for out-of-state acceptance, filling and delivery back to the buyer.
Norton Co. v. Dep’t of Rev., 340 U.S. 534, 537 (1951).
The 1920s saw the rise of national magazines followed by the 1930s rise of
nationwide radio networks. Nat’l Broad. Co. v. United States, 319 U.S. 190, 197
(1943). Roland Marchand, Advertising the American Dream 7 (1985). Also, the
federal government enacted nationwide New Deal programs and policies in the
1930s to alleviate the effects of the Great Depression. With this increasingly

11
integrated national economy, the United States Supreme Court in 1938 recognized
the need for interstate commerce to “pay its way.” 8 Western Live Stock v. Bureau
of Revenue, 303 U.S. 250, 254 (1938). In a decision involving the taxation of an
interstate magazine, the Court held out-of-state sellers gaining economic advantage
in a state must pay their just share of the state tax burden. Ibid. Physical presence
was no longer needed to establish taxation. Economic activity in the state would be
the standard.
The Supreme Court soon retreated from economic nexus starting in 1944
when it declared “[t]he very purpose of the Commerce Clause was to create an area
of free trade among the several States.” McLeod v. J. E. Dilworth Co., 322 U.S.
327, 330 (1944). The Court held “[u]nless some local incident occurs sufficient to
bring the transaction within its taxing power, the vendor is not taxable.” Norton,
340 U.S. at 537. In other words, physical presence.9 See Hartman at 99.
With physical presence once again the standard, the drummer exception
continued to have vitality in the late 1940s through the 1950s. Norton, 340 U.S. at
8 This echoed Justice Holmes comments from earlier in the decade that “[e]ven
interstate commerce must pay its way.” N.J. Bell Tel. Co. v. State Board, 280 U.S.
338, 351 (1930) (Holmes, J., dissenting).
9 “[T]he distinction between taxable and non-taxable activities or events for
commerce clause purposes, often ha[d] been made to depend upon whether the
activity or event taxed had some physical connection with interstate movement . . .
.” Hartman at 99.

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537 (citing McLeod, 322 U.S. 327); West Point Wholesale Grocery Co. v. City of
Opelika, 354 U.S. 390, 391 (1957); Nippert v. City of Richmond, 327 U.S. 416, 417-
18 (1946); Memphis Steam, 342 U.S. at 392-93. In 1951, the Supreme Court plainly
recognized “[w]here a corporation chooses to stay at home in all respects except to
send abroad advertising or drummers to solicit orders which are sent directly to the
home office for acceptance, filling, and delivery back to the buyer, it is obvious that
the State of the buyer has no local grip on the seller. Unless some local incident
occurs sufficient to bring the transaction within its taxing power, the vendor is not
taxable.” 10 Norton, 340 U.S. at 537 (citing McLeod, 322 U.S. 327).
C. The reascendance of the economic activity standard.
Like the internet of today, the rise of television had a profound impact upon
our culture including how goods were marketed and sold. Courts and commentators
recognized that:
Several hundred travelling salesmen, no matter how avidly
they hawk their wares, are not nearly as effective a
“nexus” for an exploitation or invasion of a consumer
market as a Dinah Shore or a Pat Boone as they croon their
sponsor’s products into the hands of thousands of
purchasers on interstate television and radio. Is the state
of market to be denied a tax from either the out-of-state
seller or the broadcasting company because the contacts of
10 The use of the term “grip” may be a pun by the Court. A grip commonly referred
to the suitcase a drummer carried. Timothy B. Spears, 100 Years on the Road: The
Traveling Salesman in American Culture 12, 88, 135 (1995); Friedman at 80.

13
such out-of-state sellers and broadcasters are ethereal
only? 11, 12
[Paul J. Hartman, State Taxation of Corporate Income
from a Multistate Business, 13 Vand. L. Rev. 21, 43
(1959) (quoted in Am. Refrigerator Transit Co. v. State
Tax Comm’n, 395 P.2d 127, 131 n.2 (Oregon 1964)).]
By 1959, over eighty-five percent of households had a television. Broad.
Publ’ns, Inc., 1959 Broadcasting Yearbook Issue A-21 (1959). Viewing time
averaged five and one-half hours per day. Ibid. 	Against this backdrop,
Northwestern States Portland Cement Co. v. Minnesota, came before the Supreme
Court in 1959.13 358 U.S. 450 (1959). The Court undertook the opportunity to
“clear[] up the tangled underbrush of past cases . . . .” 14 Id. at 457. Past decisions
11 Dinah Shore hosted The Dinah Shore Chevy Show, a variety program on the
National Broadcasting Company (NBC) network from 1956-1963. Vincent Terrace,
1950s Television Advertising: The Sponsors and Programs 25 (2025). Pat Boone
hosted The Pat Boone Chevy Show, a variety program on the American
Broadcasting Company (ABC) network from 1957-1960. Ibid.
12 An FCC Commissioner from the era described television programming as a “vast
wasteland” with “endless[] commercials - - many screaming, cajoling, and
offending.” Excerpts from Speech by Minow, N.Y. Times, May 10, 1961, at 91.
13 Shortly before, in 1958, the New Jersey Legislature approved a net income tax on
interstate corporate businesses. L. 1958, c. 63, § 2 (codified as amended at N.J.S.A.
54:10A-5(c)).
14 Northwestern “concern[ed] the constitutionality of state net income tax laws
levying taxes on that portion of a foreign corporation’s net income earned from and
fairly apportioned to business activities within the taxing State when those activities

14
“ha[d] ‘not always been clear[,] consistent or reconcilable.’” Id. at 458 (quoting
Miller Bros. Co. v. Maryland, 347 U.S. 340, 344 (1954)).
The Court “conclude[d] that net income from the interstate operations of a
foreign corporation may be subjected to state taxation provided the levy is not
discriminatory and is properly apportioned to local activities within the taxing State
forming sufficient nexus to support the same.” Id. at 452. This harkened back to
the 1938 Western Live Stock decision in which the court declared that interstate
commerce “must pay its way.” 303 U.S. at 254. The Court reinvigorated economic
activity as the standard. See CIT Fin. Servs. Consumer Disc. Co. v. Dir., Div. of
Tax’n, 4 N.J. Tax 568, 577 (Tax 1982).
Northwestern consisted of two cases.15 Both taxpayers maintained sales
offices in the taxing states. 358 U.S. at 454, 455-56. With sales offices as a local
incident in the taxing state, the Court could have reached the same decision without
abandoning the physical presence test. Compare Norton, 340 U.S. at 538-39 (1951
– taxable, branch office and warehouse in state), with West Point, 354 U.S. at 391
are exclusively in furtherance of interstate commerce.” Id. at 452. There was not
any question as to the fairness of any apportionment. Id. at 453-54.
15 Northwestern is a consolidated appeal of two decisions. The Minnesota Supreme
Court’s decision in State v. Northwestern States Portland Cement Co., 84 N.W.2d
373 (Minn. 1957) and the Georgia Supreme Court’s decision in Stockham Valves &
Fittings, Inc. v. Williams, 101 S.E.2d 197 (Ga. 1957).

15
(1957 – not taxable, no place of business, office or inventory in state). Instead, the
Court decided to discard the tangled underbrush of past decisions and reembraced
an economic activity standard.
D. Congress reacts to the Court.
With the “broad scope” of the Northwestern ruling in hand, three states
amended their laws within six months to implement the economic activity standard.
S. Rep. 86-658, at 4 (1959). Businesses complained of the perceived tremendous
difficulty of complying with a multitude of existing state and local tax laws. Id. at
3. The business community complained of uncertainty. H.R. Rep. 86-936, at 2
(1959). The mail-order, radio and television industries were unsure how they would
be affected. S. Rep. 86-453, at 4 (1959).
Multiple bills were introduced to roll back the Supreme Court’s renewed
embrace of economic nexus. A House bill, H.R. Res. 450 (1959), would have
precluded taxation unless the business maintained an office, warehouse or other
facility in the state. In other words, the bill was rooted firmly in physical presence.
The Senate was more circumspect. One senator recognized that the traditional
yardstick for taxation was a place of business. 86 Cong. Rec. 16359 (1959). Another
felt physical presence simplified administration of any tax. 86 Cong. Rec. 16362,
(1959). Still, some senators were reluctant to abrogate Northwestern. 86 Cong.
Rec. 16386, 16387 (1959). The debate revealed strong pushback from state tax

16
administrators. 86 Cong. Rec. 16356-57, 16377, 16378, 16380, 16382 (1959).
During the debate there was extensive and repeated discussion of drummers and
drummer-type activity. 86 Cong. Rec. 16361-62, 16385, 16474, 16475, 16476,
16493, 16493-94 (1959). The Senate was hesitant to wholeheartedly endorse a
physical presence test.
The leading Senate bill, S. 2524 (1959), initially limited taxation in three
drummer-type situations despite economic activity in a state. The bill was designed
to take the drummer exception from the physical presence standard and apply it to
the economic activity standard.
Subsection (a)(3) of S. 2524 precluded taxation under the facts in
Northwestern. That is, when an in-state sales office is maintained with only in-state
solicitation taking place. The Senate struck subsection (a)(3) in an effort to make
the bill more palatable to pass. 86 Cong. Rec. 16477 (1959). In other words, the
Senate chose not to abrogate Northwestern.
What remained were subsections (a)(1) and (a)(2) which mirrored two
pending appeals to the Supreme Court, Brown-Forman Distillers Corp. v. Collector
of Revenue, 101 So.2d 70 (La. 1958) and International Shoe Co. v. Fontenot, 107
So.2d 640 (La. 1958). In both appeals, the Louisianna Supreme Court allowed
taxation despite no activity beyond solicitation occurring in-state. The Supreme

17
Court declined to hear the appeals in the immediate wake of the Northwestern
decision.
Subsection (a)(2) excepts taxation under the fact pattern of Brown-Forman
where a product manufacturer sends “missionary men” into a state. 101 So.2d at 70.
The missionary men (now commonly known as manufacturer’s representatives)
traveled along with wholesalers’ sales personnel to visit retailers. Ibid. The
missionary men did not maintain offices in the state. Ibid. Nonetheless, the
Louisiana Supreme Court held the activity opens the door to taxation. Id. at 72. Two
weeks after Northwestern, the United States Supreme Court dismissed the appeal.
359 U.S. 28 (1959).
Subsection a(1) precludes taxation based upon the facts of International Shoe
where out-of-state personnel travel throughout the state. 107 So.2d at 640. The
sellers did not maintain sales offices in the state. Ibid. The Louisiana Supreme Court
declared the sellers were subject to taxation. Id. at 641. Two months after
Northwestern, the United States Supreme court denied certiorari seeking reversal.
359 U.S. 984 (1959).
While Brown-Forman and International Shoe were not dispositive of whether
the Court had fully abandoned the drummer exception, Congress cited Brown-

18
Forman while expressing “general apprehension” as to where the law was heading.16
S. Rep. 86-658, at 3. Only seven months after the Northwestern decision, the
President signed S. 2524 into law as P.L. 86-272. 17
16 The Senate Committee comments appear prescient when a year later in a sales tax
case and after the enactment of P.L. 86-272, the Supreme Court determined that an
out-of-state seller who did not maintain any offices but merely had sales personnel
working on its behalf in the taxing state had sufficient nexus. Scripto, Inc. v. Carson,
362 U.S. 207, 211-12 (1960).
17 The relevant text of P.L. 86-272 follows:
Minimum standards. No State, or political subdivision
thereof, shall have power to impose, for any taxable year
ending after the date of the enactment of this Act [enacted
Sept. 14, 1959], a net income tax on the income derived
within such State by any person from interstate commerce
if the only business activities within such State by or on
behalf of such person during such taxable year are either,
or both, of the following:
(1) 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; and
(2) the solicitation of orders by such person,
or his representative, in such State in the
name of or for the benefit of a prospective
customer of such person, if orders by such
customer to such person to enable such
customer to fill orders resulting from such

19
P.L. 86-272 does not abrogate the economic activity standard. In fact, it
generally allows taxation based upon “income derived within such State.” 15 U.S.C.
§ 381(a). However, P.L. 86-272 creates an exception for the “sales of tangible
personal property.” Ibid. When “business activities within [a] [s]tate” are limited
to “solicitation” along with approvals obtained and shipments made from “outside
the state,” a state cannot pursue an income tax. Ibid. P.L. 86-272 takes the drummer
exception from the physical presence standard described by the Court’s 1951 Norton
decision and applies it to the economic activities standard announced by the Court’s
1959 Northwestern decision.
To summarize, there are three key takeaways. First, Congress did not
abrogate the economic activities standard. Second, Congress did not impose a
physical presence test such as that proposed by H.R. Res. 450. Third, Congress
engrafted a drummer exception onto the economic activities standard.
Only intended to be a temporary measure, P.L. 86-272 also authorized what
came to be known as the Willis Committee to study the issue to come up with a more
solicitation are orders described in
paragraph (1).
[15 U.S.C. § 381(a).]

20
permanent and comprehensive solution.18 U.S. Steel Corp. v. Multistate Tax
Comm’n, 434 U.S. 452, 486-87 (1978). A 1963 survey conducted and reported upon
by the Willis Committee reveals that despite fears to the contrary, most states still
relied upon physical presence as a standard for taxation. H.R. Rep. 88-1480, at 147-
51 (1964). With many states using physical presence, there were few decisions
dealing with economic nexus.
E. Uncertainty after the Court again considers physical presence.
A few years after the Willis Committee report, the Supreme Court
reinvigorated the physical presence standard in 1967. The Court held that out-of-
state sellers could not be responsible for sales tax collections. National Bellas Hess,
Inc. v. Dep’t of Revenue, 386 U.S. 754, 759-60 (1967). The decision breathed new
life into the physical presence standard. In 1992, the Supreme Court in Quill Corp.
v. North Dakota reaffirmed the holding of Bellas Hess. 504 U.S. 298, 317-18 (1992).
The physical presence standard remained viable until 2018 when the Supreme Court
decided South Dakota v. Wayfair, Inc. expressly overruling Bellas Hess and Quill
and firmly setting economic activity as the standard. 585 U.S. 162, 188 (2018).
The years between Bellas Hess and Wayfair, 1967 to 2018, marked a period
of uncertainty. AccuZIP v. Dir., Div. of Tax’n, 25 N.J. Tax 158, 169 (Tax 2009)
18 The Willis Commission held extensive hearings and issued a multivolume report
of hundreds of pages in 1964 exhaustively covering all forms of interstate taxation.
See H.R. Rep. 88-1480 (1964).

21
(“[s]tate courts . . . split as to . . . physical presence”). There was some disagreement
as to whether the physical presence standard of Bellas Hess and Quill only applied
to sales tax. Lanco, Inc. v. Dir., Div. of Tax’n, 188 N.J. 380, 383 (2006) (no
“universal physical presence requirement” for state taxation). See also J.C. Penney
Nat. Bank v. Johnson, 19 S.W.3d 831, 839 (Tenn. Ct. App. 1999) (physical presence
standard beyond sales tax); Tax Comm’r v. MBNA America Bank, N.A., 640 S.E.2d
226, 234 (W. Va. 2006) (economic presence test); Galland Henning Nopak, Inc. v.
Combs, 317 S.W.3d 841, 844-45 (Tex. App. 2010) (bright-line physical presence
requirement beyond sales tax). There was further disagreement whether Bellas Hess
and Quill applied to intangible sales. Geoffrey, Inc. v. S.C. Tax Comm’n, 437 S.E.2d
13, 18 (S.C. 1993) (physical presence not applicable for intangibles); Lanco, Inc. v.
Dir., Div. of Tax’n, 379 N.J. Super. 562, 568 (App. Div. 2005) (agreeing with
Geoffrey), aff’d, 188 N.J. 380 (2006).
Amidst this uncertainty, no New Jersey court decision squarely and
definitively addressed whether P.L. 86-272 “business activities within such State”
only includes activities which physically occur in-state.19 The New Jersey decisions,
save one, addressed whether business activities physically occurring in-state were
beyond P.L. 86-272 solicitation. See, e.g., Clairol, Inc. v. Kingsley, 109 N.J. Super.
22, 30 (App. Div. 1970) (technical support), aff’d o.b., 57 N.J. 199; Mark Andy, Inc.
19 The court is also not aware of any out-of-state decisions.

22
v. Dir., Div. of Tax’n, 8 N.J. Tax 593, 598-99 (Tax 1986); (installation and
maintenance of equipment); Chester A. Asher, Inc. v. Dir., Div. of Tax’n, 22 N.J.
Tax 582, 595-98 (Tax 2006) (pick up of collections and stale candy). A close reading
of the only United States Supreme Court decision to squarely address P.L. 86-272
during this period, Wisconsin Department of Revenue v. William Wrigley, Jr., Co.,
only considered whether business activities physically performed in-state
constituted solicitation.20 505 U.S. 214, 232-235 (1992).
However, in one New Jersey decision, AccuZIP, seller’s personnel, physically
located out-of-state, provided technical support for software to in-state New Jersey
buyers. 25 N.J. Tax at 163. The court was cognizant of an Appellate Division
determination that the Bellas Hess physical presence standard did not apply to
intangible property. Id. at 170. However, the court determined the software to be
tangible property. Id. at 172. The court noted that AccuZIP never had an employee
present in New Jersey soliciting. Id. at 181. And, if it did, the protections of P.L.
86-272 would apply. Ibid. By inference, the court looked to physical presence as
the standard for “business activities within such State.” 15 U.S.C. § 381(a).
20 Heublein, Inc. v. S.C. Tax Comm’n, 409 U.S. 275, 281-84 (1972), considered the
interplay between P.L. 86-272 and the Twenty-first Amendment.

23
F. The Court considers interstate taxation of internet sales.
The Supreme Court’s decision in Wayfair opens the door to resolving whether
there can be P.L. 86-272 business activities within a state without in-state physical
presence. Wayfair, 585 U.S. at 178. Wayfair, a sales tax case, unequivocally
abandoned the physical presence test. Ibid. The decision arose out of internet sales.
Id. at 170.
The Wayfair Court recognized “[e]ach year, the physical presence rule
becomes further removed from economic reality and results in significant revenue
losses to the States.” Id. at 176. “Physical presence is not necessary to create a
substantial nexus.” Id. at 178. “[I]t is not clear why a single employee or a single
warehouse should create a substantial nexus while ‘physical’ aspects of pervasive
modern technology should not. For example, a company with a website accessible
in [New Jersey] may be said to have a physical presence in the State via the
customers’ computers.” Id. at 181. “The ‘dramatic technological and social
changes’ of our ‘increasingly interconnected economy’ mean that buyers are ‘closer
to most major retailers’ than ever before -- ‘regardless of how close or far the nearest
storefront.’” Ibid. (quoting Direct Mktg. Ass’n v. Brohl, 575 U.S. 1,17 (2015)
(Kennedy, J., concurring)).
“This Court should not prevent States from collecting lawful taxes through a
physical presence rule that can be satisfied only if there is an employee or a building

24
in the State.” Wayfair, 585 U.S. at 179. The old physical presence rule had “come
to serve as a judicially created tax shelter for businesses . . . .” Ibid. Echoing earlier
Supreme Court decisions of Western Live Stock and Northwestern, the Wayfair
court declared “it is ‘not the purpose of the Commerce Clause to relieve those
engaged in interstate commerce from their just share of state tax burden.’” Id. at 178
(quoting Complete Auto, 430 U.S. at 288). “[T]here is nothing unfair about
requiring companies that avail themselves of the States’ benefits to bear an equal
share of the burden . . . .” Wayfair, 585 U.S. at 182-83. “State taxes fund the police
and fire departments that protect the homes containing their customer’s [goods] and
ensure goods are safely delivered; maintain the public roads and municipal services
that allow communication with and access to customers; support the ‘sound local
banking institutions to support credit transactions and courts to ensure collection of
the purchase price.’” 21 Id. at 182 (quoting Quill, 504 U.S. at 328).
21 The Court was also concerned about courts unduly interfering in the marketplace.
“[I]t is certainly not the purpose of the Commerce Clause to permit the Judiciary to
create market distortions. ‘If the Commerce Clause was intended to put businesses
on an even playing field, the physical presence rule is hardly a way to achieve that
goal.’” Id. at 178-79 (quoting Quill, 504 U.S. at 329 (opinion of White, J.,
dissenting)). “Distortions caused by the desire of businesses to avoid tax collection
mean that the market may currently lack storefronts, distribution points, and
employment centers that otherwise would be efficient or desirable.” Wayfair, 585
U.S. at 179.

25
G. The Director’s regulations
In the wake of Wayfair, the Director now adopts regulations addressing
internet sales. Unfortunately, until Wayfair, many courts clung to the old paradigm
of physical presence after the Court announced Bellas Hess. Wayfair cut away the
tangled underbrush of past decisions. However, courts must still respect the
Congressional mandate of P.L. 86-272 which engrafted the drummer exception onto
the economic activity standard. If a seller of tangible goods limits “business
activities within such State” to “solicitation” and the sales are approved and fulfilled
from “outside the state,” a state cannot impose an income tax on the seller. 15 U.S.C.
§ 381(a). Despite P.L. 86-272, the economic activity standard remains for tangible
goods. It is merely limited by the P.L. 86-272 drummer exception.
While couched as something new, the internet is just the latest technological
iteration of past practices. Just as today, it was recognized at the time P.L. 86-272
was enacted in 1959 that buyers can be effectively reached without the seller ever
stepping foot in the state. Instantaneous two-way communications including
telephones, teletype and telex machines existed in 1959. See Stockham Valves, 101
S.E.2d at 199. Television advertising and solicitation reached most Americans.
Broadcasting at A-21. The internet has only made all this more efficient and
pervasive.

26
ACMA members sell tangible goods in New Jersey which they approve and
fulfill from outside New Jersey. The question is whether they engage in “business
activities within [New Jersey]” in addition to “solicitation.” 15 U.S.C. § 381(a).
The parties do not dispute that business activities include providing interactive
technical support or placing internet cookies. Neither party claims technical support
is solicitation. See Wrigley, 505 U.S. at 233-34 (determining if certain functions are
ancillary to solicitation). The true focus is whether the activities occur within New
Jersey.22 P.L. 86-272 does not require physical presence within New Jersey to
establish a business activity within the state. Nevertheless, for taxation to apply, a
modicum of business activity besides solicitation is necessary.
1. Interactive Technical Support
A preliminary task is to define technical support. Technical support is the
seller’s education of the buyer of how to effectively use the product. Relevant
parallels can be drawn between technical support and academic classroom
education. Nowadays, academic learning is commonly divided into synchronous
and asynchronous methods. See, e.g., N.J.A.C. 13:30-5.2(a), 13:31-1.7(e)(1)(ii),
13:44E-4.9(h). The most common example of synchronous learning is an in-person
or live remote class where questions can be asked of the instructor. In other words,
22 Moreover, the ACMA does not mount a challenge based upon the dormant
Commerce Clause.

27
an interactive process. On the other hand, asynchronous learning is a recorded class
session that can be viewed later thereby depriving the learner of asking questions
and engaging in an interactive process.
As applied here, the question is whether the technical support communications
are attributable to the seller’s out-of-state location or the buyer’s in-state location.
For asynchronous communications such as frequently asked questions posted on a
website, the Director’s regulations indicate it is not a business activity conducted
within the state. 23 N.J.A.C. 18:7-1.9A(b)(1). The ACMA agrees. The court finds
this to be a correct conclusion.
For synchronous communications such as “electronic chat” and “an internet
help desk for technical support, whereby the customer can talk to a service
representative who then may conduct repair services through the internet,” the seller
is reaching into New Jersey and interacting with the buyer of the goods. See
N.J.A.C. 18:7-1.9A(a)(4). Thus, the Director’s regulations correctly frame this type
23 The asynchronous regulation reads in pertinent part:
Posting frequently asked questions (FAQ) on a webpage
to assist customers or potential customers;
[N.J.A.C. 18:7-1.9A(b)(1).]

28
of interactive technical support as a business activity taking place in New Jersey.24
N.J.A.C. 18:7-1.9A(a)(4).
Determining the location of interactive technical support is not a binary
choice. Interactive technical support occurs both out-of-state where the seller is
providing the support as well as in New Jesey where the buyer is receiving the
support. A concurrent business activity is not a foreign concept when considering
state income taxation. In other contexts where taxability is not at issue, but the
quantum of taxation is, both the Director and the courts have apportioned the tax
between in-state and out-of-state activities. See Bank of Am. Consumer Card
Holdings v. Dir., Div. of Tax’n, 29 N.J. Tax 427, 471-72 (Tax 2016). Even with
interactive technical support deemed to occur concurrently in-state and out-of-state,
24 The synchronous regulation reads in pertinent part:
Providing post sales assistance to an electronic chat, email,
or application that the taxpayer’s customers access. Some
examples include, but are not limited to: chat rooms for
troubleshooting problems, . . . complaint resolution, or an
internet help desk for technical support, whereby the
customer can talk to a service representative who then may
conduct repair services through the internet;
[N.J.A.C. 18:7-1.9A(a)(4).]
Notably, as discussed below, the court does not find that e-mails are always
synchronous.

29
the protections of P.L. 86-272 would not apply since some quantum of the support
constitutes in-state activity beyond solicitation.
Somewhere in-between the synchronous communications of internet chat and
the asynchronous communications of frequently asked questions posted on a
website, there is e-mail and regular mail technical support. The Director asserts e-
mail technical support is a business activity in New Jersey. N.J.A.C. 18:7-
1.9A(a)(4). E-mail can have an interactive quality like other synchronous
communications. But, e-mail can also lack the immediacy of synchronous
communication. An e-mail with an auto-response that someone may respond within
seventy-two hours is no more responsive than a letter sent by regular mail. The
question becomes difficult when the e-mail response rate is quicker.
As to delayed response e-mail, or regular mail for that matter, the question is
whether the seller is actively interacting with the buyer in the taxing jurisdiction or
merely assembling information out-of-state for delivery to the buyer. A frequently
asked question website is a compilation of questions assembled out-of-state which
the in-state buyer can access. Likewise, delayed response e-mail or regular mail is
an out-of-state assemblage of information which is then sent to the in-state buyer.
The Director’s regulations provide that the asynchronous communications of a
frequently asked questions technical support website are not business activities in
New Jersey. N.J.A.C. 18:7-1.9A(b). Likewise, responding to an e-mail or regular

30
mail days later is not synchronous, but rather more akin to the asynchronous
frequently asked questions.
On the other hand, if the seller responds to e-mails in near real time, this would
evince interactive synchronous communications. The regulations do not delimit e-
mail response times. The ACMA does not factually address e-mail technical
support. The court is reluctant to preempt a regulation on declaratory judgment
without a firm factual record.
Machine generated responses are another area the court does not have a
sufficient factual record to address at this time. On a basic level, a web-based pre-
programed decision tree can respond to a buyer’s query. For example, the first
question may be is the device switched on. If no, instruct the user to switch on the
device. If yes, the user is then asked if the device is plugged in, and so on until
reaching a possible resolution. In many ways this may be no different than the
information provided by a frequently asked question page providing a step-by-step
troubleshooting guide.
The question becomes more difficult when what is colloquially referred to as
artificial intelligence is involved. Computers utilizing natural language processing,
sometimes referred to as chatbots, are trained to provide responses to queries
submitted by users. See Garner v. Kadince, Inc., 571 P.3d 812, 814 n.1 (Utah Ct.
App. 2025); Wash. Rev. Code § 19.440.010(3). Is the computer interacting with the

31
user like a human would or is it merely regurgitating a rote decision tree? The
answer in part depends upon the sophistication of the chatbot. In any event, neither
the regulations nor ACMA’s factual recitation addresses the issue. The court
declines to rule on this issue.
Certain business activities which arguably constitute interactive technical
support are de minimis activities in the state. The United States Supreme Court has
determined that de minimis in-state business activities do not give rise to taxation.
Wrigley, 505 U.S. at 231. For example, sellers of certain household chemicals are
certainly wise to have emergency telephone number for buyers to call in the event
of ingestion or other poisoning. From a public policy perspective, the court and
inferably the Director does not want to discourage sellers from providing such
support for fear of establishing nexus. Taxation is an important tool of social policy.
A responsible seller should not be punished with taxation because it merely provides
an emergency contact to address safety issues such as poisoning.
The ACMA also infers that P.L. 86-272 establishes a physical presence
standard for the sale of tangible goods. That is not so for three reasons.
First, at the time the bill which became P.L. 86-272 was being considered,
Congress also considered a bill reestablishing the physical presence standard. See
H.R. Res. 450. Instead, Congress opted for the drummer sales exception embodied
in P.L. 86-272.

32
Second, P.L. 86-272 condones the economic activity standard. But for the
drummer exception, the statute allows taxation under the economic activity standard
“on the income derived within such State.” 15 U.S.C. § 381(a).
Third, P.L. 86-272’s basis for differentiating taxability is not the seller’s
physical location, but rather the location of the business activity. P.L. 86-272
identifies solicitation as a business activity that can occur “within such State”
whereas approval and fulfillment must occur “outside the state.” Certainly, a seller
can perform a business activity within a state without being physically present.
“Between targeted advertising and instant access to most consumers via any internet-
enabled device, ‘a business may be present in a State in a meaningful way without
that presence being physical in the traditional sense of the term.’ A virtual
showroom can show far more inventory, in far more detail, and with greater
opportunities for consumer and seller interaction than might be possible for local
stores.” Wayfair, 585 U.S. at 181 (quoting Direct Mktg., 575 U.S. at 18 (Kennedy,
J., concurring)). This observation harkens back to earlier comments at the time P.L.
86-272 was adopted, when television was more effective than scores of sales
personnel coming into the State. Hartman, 13 Vand. L. Rev. at 43; Am.
Refrigerator, 395 P.2d at 131 n.2.
Long before the days of the internet, the United States Supreme Court noted
drumming instead of peddling gives rise to tax advantages. Norton, 340 U.S. at 537.

33
Nevertheless, the Court wisely observed “from a competitive point of view, that
system has disadvantages. The trade may view the seller as remote and inaccessible.
He cannot be reached with process of local courts for breach of contract, or for
service if the goods are defective or in need of replacement.” Id. at 538. With the
internet, ACMA sellers now want to have it both ways. They want the tax
advantages of the P.L. 86-272 drummer exception, yet at the same time not be remote
and inaccessible. As observed in Wayfair, the internet allows out-of-state sellers to
meaningfully engage in “business activities within such State” as defined by P.L.
86-272 without ever stepping foot in the jurisdiction. Wayfair, 585 U.S. at 181. The
Director’s regulations allowing state income taxation because of synchronous
technical support facilitated by the internet is a proper exercise of the Director’s
powers.
2. Cookies
The Director describes an internet cookie as “small blocks of data created by
a webserver while a user is browsing a website, which is placed on the user’s
computer or other device by the web browser.” N.J.A.C. 18:7-1.9A(a)(2).25 Per the
Director’s regulations, whether cookie deployment is taxable turns upon how a seller
uses cookies. The Director has determined that deploying cookies facilitating the
25 While technically the web browser places the cookie, the web server instructs the
web browser to place the cookie on the user’s computer. Unless the user configures
the web browser to reject cookies, the web browser does indeed place the cookie.

34
tracking of buyers’ virtual internet shopping baskets would not subject the seller to
taxation. N.J.A.C. 18:7-1.9A(b)(2). While seemingly a New Jersey business
activity, it constitutes part of the solicitation process. Wrigley, 505 U.S. 228-29. On
the other hand, cookies which “gather market or product research whereby the
taxpayer gathers and assembles the data for sale as a package of customer/marketing
information to data-brokers or other third parties” expose a seller to taxation.
N.J.A.C. 18:7-1.9A(a)(2).
It is important to understand how cookies are deployed in the marketplace.
Over the past decades, there have been thousands of lawsuits alleging privacy
violations from the use of cookies and other tracking tools. Cal. Assemb., Floor
Analysis of S.B. No. 690 1 (July 2, 2026). These suits provide insight into the
implementation of internet tracking. See, e.g., In re Meta Pixel Healthcare Litig.,
647 F. Supp.3d 778, 784-86 (N.D. Cal. 2022); Adair v. Cigna Corp. Servs., 818 F.
Supp.3d 641, 652-53 (E.D. Pa. 2026); In re Meta Android Privacy Litig., 833 F.
Supp.3d 1010, 1019-21 (N.D. Cal. 2026). See also Cong. Rsch. Serv. R47298,
Online Consumer Data Collection and Data Privacy 6 (Oct. 31, 2022).
Sellers are offered free analytic tools by companies such as Google and Meta
Facebook. Healthcare, 647 F. Supp.3d at 784. These tools have two components.
First, a user interface allows a seller to view data collected by the analytic company
as to the performance and effectiveness of the seller’s website. Ibid.; Adair, 818 F.

35
Supp.3d at 653. Second, the data for the user interface is obtained by the analytic
company’s computer code, sometimes called a pixel, which must be embedded by
the seller into the computer code that makes a seller’s website function. Healthcare,
647 F. Supp.3d at 784, Adair, 818 F. Supp.3d at 652, Android, 833 F. Supp.3d at
1020.
When a potential or actual buyer views a website, computer code instructs the
buyer’s computer on how to display the website. Healthcare, 647 F. Supp.3d at 785,
Adair, 818 F. Supp.3d at 652, Android, 833 F. Supp.3d at 1020. The embedded
computer code from the analytic company places cookies onto buyers’ computers
and reads cookies that were previously placed. Android, 833 F. Supp.3d at 1020.
The cookies contain an identification code of the buyer or data about buyer behavior.
Ibid. Tracking data as to a buyer’s behavior is sent directly from the buyer’s
computer to the analytic company. Ibid.; Healthcare, 647 F. Supp.3d at 785. The
collected data powers the analytic tools provided by the analytic companies.
Healthcare, 647 F. Supp.3d at 785.
In addition to powering the analytic tools, the analytic companies aggregate
data from many websites. Android, 833 F. Supp.3d at 1020. Using this data, the
analytic companies provide targeted advertisements over the internet and social
media applications. Healthcare, 647 F. Supp.3d at 785, Adair, 818 F. Supp.3d at
653. Litigation does not reveal that the analytic companies are paying the sellers.

36
There is not any dispute about whether the analytic companies profit from gathering
data. Healthcare, 647 F. Supp.3d at 785, Adair, 818 F. Supp.3d at 653.
The regulation specifies that taxation is imposed if “the taxpayer gathers and
assembles the data for sale . . . .” N.J.A.C. 18:7-1.9A(a)(2). The factual description
of what constitutes taxable activity embedded in the regulation does not technically
square with the prevailing understanding as expressed in scores of reported judicial
decisions of how cookies are deployed on the internet. Moreover, the ACMA
description of how sellers use cookies is technically vague. Neither party has
presented any evidence of sellers assembling data for sale. The court, especially in
a declaratory judgment action, is not going to rule upon whether a regulation
properly imposes taxation based upon a certain factual pattern that does not seem to
be tethered to actual practice in the industry. In re N.J. Firemen’s Ass’n, 230 N.J.
258, 275 (2017).
Sellers allow third parties to deploy cookies and gather data. Third parties
provide analytic information to sellers. If the Director believes the current prevailing
arrangement is a quid pro quo that rises to the level of a New Jersey business activity,
the regulation needs to spell this out. The court is not going to rewrite the regulation
to capture the prevailing technical usage and then consider whether it properly

37
constitutes a business activity.26 The court declines to pass upon the validity of this
regulation without evidence of sales of cookie data by tangible goods sellers.
IV. 	CONCLUSION
For the foregoing reasons, the court denies ACMA’s motion for summary
judgment and grants the Director’s motion for summary judgment dismissing the
complaint.
26 Certainly, the activities of third-party analytic companies are New Jersey business
activities. However, that issue is not before the court.