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Affiliate Nexus and Sales Tax – Its Legality and Implications


Product Code - TMA46
Speaker(s): Annette Nellen, Arthur R. Rosen, Brian W. Toman
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As more and more consumers choose to purchase goods online rather than from traditional retail establishments, states and localities face the issue of fewer sales tax collectors and must rely instead on consumers to self-assess use tax. The result is a decline in sales and use tax collections. Governments prefer to collect the tax from retailers. Some states have enacted "affiliate nexus" laws to try to increase sales tax collections.

Does your business or your clients have new sales tax collection obligations under these nexus laws? What business relationships might cause an e-tailer to become a sales tax collector in a state in which they have no physical presence? Are these laws constitutional? Join our expert panel as they discuss these issues and much more.

This webinar will explain "affiliate nexus" and what several states have done or propose to do to try to get more sellers to become sales tax collectors. These so-called "Amazon" laws can apply to e-commerce vendors of all sizes, and the legislation varies among the states. A review of what states have enacted will be included along with the background on why the states are pursuing this approach and whether it is in line with the Quilldecision and other cases.

The presentation will also help you to know if your business (or clients) are subject to these laws. Also covered will be the effect sales tax collection might have on other taxes and why some affiliate nexus laws have a rebuttable presumption tied to solicitation and the practical and legal distinction between solicitation and advertising. Finally, alternative approaches will be discussed such as the Streamlined Sales & Use Tax (SSUTA), H.R. 2701, the Colorado reporting/MTC approach, and others.

Presentation Objectives:

  • The approach behind affiliate nexus under the Amazon or click-through nexus laws.
    • Why states believe it is fair
    • How these laws could impact e-commerce and interstate commerce
  • Common elements of the laws:
    • What is an agent and how does its activities create nexus?
    • Annual safe-harbor thresholds
    • Rebuttable presumptions
    • Key terms and definitions
    • Are sales of services and tangible personal property treated similarly
    • Where do we draw the line?
  • The distinction between engaging in online solicitation or passive advertising with an in-state associate
  • Activities that a state could deem to be “solicitation” (e.g., distributing printed material such as flyers or coupons, or initiating phone calls or sending e-mails)
  • Activities that a state would likely deem as “passive advertising” (e.g., newspaper ads, maintaining a website that a user visits on his or her own initiative)
  • How the Streamlined Sales and Use Tax Agreement and the enactment of the federal Main Street Fairness might resolve some aspects of the current controversy surrounding the click-through nexus laws.

Upon completion of this program participants will be able to:

  • Understand the approach to affiliate nexus under the so-called Amazon or click-through nexus laws
  • Identify the states that have enacted these laws
  • Gain familiarity with the key provisions and common elements of click-through nexus laws
  • Recognize the distinction between passive advertising and online solicitation
  • Consider some practical planning approaches to avoid running afoul of the laws

Annette Nellen, Arthur R. Rosen, Brian W. Toman

Annette Nellen, CPA, Esq.
San Jose State University


Annette Nellen is a professor in and director of San José State University’s Masters of Science in Taxation (MST) program. She teaches courses on tax research, accounting methods, high technology tax matters, property transactions, individual taxation, state income tax, ethics, and tax policy and reform. She chairs the SJSU Athletics Board and was the chair of the SJSU Academic Senate from May 2003 to May 2005.

Annette is a frequent speaker and author on tax policy and reform topics. She is a monthly contributor to two AICPA online newsletters: Tax Insider and Corporate Taxation Insider. She was the lead author of the AICPA's Tax Policy Concept Statement No. 1—Guiding Principles of Good Tax Policy: A Framework for Evaluation of Tax Proposals. During tax reform discussions of the 1990s, she wrote A Journalist's Handbook for Tax Reform for the Tax Foundation. In the taxation of technology area, Annette is the author of Amortization of Intangibles, published by Bureau of National Affairs (BNA), part of the Tax Management Portfolios (#533-3rd).

Annette has served on the Tax Executive Committee of the AICPA and the board of the American Tax Policy Institute. She is a former chair of the ABA Tax Section's Sales, Exchanges & Basis Committee. Annette is the current chair of the AICPA's Individual Taxation Technical Resource Panel, having served on this panel since 2006. In addition, she is a member of the Executive Committee of the Tax Section of the California State Bar.

In 2000, Annette served on the academic panel that advised the Joint Committee on Taxation staff for the tax law simplification study submitted to Congress in 2001. She has also testified before tax-writing committees of the California legislature and state tax commissions, as well as the House Ways and Means Committee (April 13, 2011 on behalf of the AICPA).

Annette earned a B.S. in Accounting from CSU Northridge, an M.B.A. from Pepperdine, and a J.D. from Loyola Law School. Prior to joining SJSU in 1990, Annette was with Ernst & Young and the IRS (revenue agent and lead instructor).

Annette maintains various websites on taxation as well as the 21st Century Taxation Website and Blog; see http://www.cob.sjsu.edu/nellen_a/. 

Arthur R. Rosen
McDermott Will & Emery LLP


Arthur R. Rosen is a partner in the global law firm of McDermott Will & Emery LLP. His practice focuses on tax planning and litigation relating to state and local tax matters for corporations, partnerships, and individuals. Formerly the Deputy Counsel of the New York State Department of Taxation and Finance as well as Counsel to the Governor’s Temporary Sales Tax Commission and Tax Counsel to the New York State Senate Tax Committee, Mr. Rosen has held executive tax management positions at Xerox Corporation and AT&T. In addition, he has worked in accounting and law firms in New York City.

Mr. Rosen is a Fellow of the American College of Tax Counsel and is listed in the Best Lawyers in America and in the Best Lawyers in New York; he is also ranked in Chambers and the Legal 500.

Mr. Rosen is a past chair of the State and Local Tax Committee of the American Bar Association’s Tax Section and a past chair of the National Association of State Bar Tax Sections. He is a member of the Executive Committee of the New York State Bar Association’s Tax Section, and has served as co-chair of its Committees on New York State Tax Matters, New York City Tax Matters, and State and Local Tax Matters. He also served as President and Chairman of the NYU Tax Society and is an active member of the Institute for Professionals in Taxation. Mr. Rosen was a member of the steering committee of the NTA Communications and Electronic Commerce Tax Project. He founded and chairs the annual week-long “Introduction to State and Local Taxes” program, as well as the “State and Local Taxation II” program, offered at New York University. Mr. Rosen serves as a member of the New York State Commissioner of Taxation and Finance’s advisory council, the New York City Commissioner of Finance’s advisory council, and the New York City Tax Appeals Tribunal’s advisory council.

Mr. Rosen was the founder and editor of the monthly newsletter Inside New York Taxes, co-editor of the semi-monthly newsletters New York Tax Highlights and New York Tax Cases; he was the original editor-in-chief of CCH’s E-Commerce Tax Alert, and was the monthly tax columnist for the E-Commerce Law Journal. He has written scores of articles that have appeared in publications such as the Journal of Taxation, the Journal of State Taxation, the Journal of Bank Taxation, the State and Local Tax Lawyer, Multistate Tax Analyst, Inc. Magazine, the Assessment Digest, the Journal of New York Taxation, and The Tax Executive. Mr. Rosen has spoken extensively throughout the country on state and local tax matters.

McDermott Will & Emery LLP has one of the largest state and local tax practices in the United States. With offices located across the country, McDermott is uniquely positioned to advise and represent multi-state businesses on a broad range of state tax matters. You can find full text state and local tax articles at www.mwe.com/articles.

Brian W. Toman
Reed Smith LLP


Mr. Toman is a partner in Reed Smith's San Francisco office. His practice focuses on state and local tax controversies. Prior to entering private practice, Mr. Toman held the position of Chief Counsel of the California Franchise Tax Board (FTB). The FTB’s legal function is second in size and scope only to the legal function of the Internal Revenue Service. As Chief Counsel of the FTB, Mr. Toman had personal oversight responsibility for the FTB’s litigation cases.

Mr. Toman is recognized nationally as a leading authority on the unitary concept and formula apportionment and has been engaged as an expert witness in both California corporation and personal income tax matters. He has functioned as the lead attorney in settling some of the largest and most complex cases in California concerning corporate income tax and personal income tax. He is a former Chair of the California Bar Taxation Section.

Mr. Toman is the co-author of "Don't Do It, California: Repeal of EZ Credits Would Be Unconstitutional," published in the Tax Analyst Special Report (March 14, 2011). He earned a B.S. from the University of Southern California and a J.D. from the University of West Los Angeles.