Supreme Court Declined Case on State Tax Protections

Justices refused to review a dispute over federal safe harbor laws for out-of-state companies.

Updated on Oct. 5, 2026 in Taxes

Bold flat-color editorial illustration of a heavy geometric pillar resting on a plinth, representing the finality of a legal ruling. — The Supreme Court on Tuesday declined to hear an appeal regarding federal tax protections for out-of-state companies, upholding a lower court ruling against ASAP Cruises Inc. AI Illustration. Upload story photo >

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The Supreme Court has denied a petition to review a case concerning federal income tax protections. The decision maintains a Wisconsin tax assessment against ASAP Cruises Inc. regarding its software-as-a-service sales.

Why it matters

The case centered on whether federal law shields out-of-state businesses from state income taxes when their only local activity is soliciting sales. By declining to review the matter, the court allows lower court rulings to stand, leaving the scope of these protections limited for certain business models.

The dispute involved a Wisconsin tax assessment on software-as-a-service sales that the company argued was prohibited under Public Law 86-272. The Supreme Court denied a writ of certiorari, leaving the 2025 Wisconsin appeals court ruling in place.

The players

Supreme Court

This is the highest federal court in the United States, serving as the final arbiter of law and the constitutional interpreter for the nation.

ASAP Cruises Inc.

This is the Florida-based company that sought to avoid a state tax assessment in Wisconsin.

The details

ASAP Cruises Inc. attempted to invoke Public Law 86-272, a federal statute that prevents states from taxing the income of businesses whose local involvement is restricted solely to the solicitation of orders. The Wisconsin appeals court had previously ruled against the company, finding that its business activities exceeded those protections.

A Wisconsin appeals court ruled against the company in 2025.
The Supreme Court declined to review the case on October 5, 2026.

Market Dynamics

The outcome preserves the existing judicial interpretation of Public Law 86-272, which prohibits states from taxing out-of-state businesses that only solicit sales locally. This effectively reinforces the current tax environment for digital service providers operating across state lines.

This decision clarifies that software-as-a-service companies may remain liable for state-level income taxes despite arguments for federal safe harbor protections. Investors should note that companies with similar business models may face increased tax compliance costs in multiple jurisdictions.

The takeaway

Businesses must carefully evaluate their specific activities in every state, as digital presence may bypass traditional solicitation protections. Legal uncertainty regarding how federal law applies to modern software sales remains a critical risk factor for out-of-state operations.