Maine Expands Nexus-Creating Activities, Includes Affiliate and “Click-Through” Nexus

The Bloomberg BNA Tax Management Weekly State Tax Report filters through current state developments and analyzes those critical to multistate tax planning.

By Christopher Young  

Sellers of tangible personal property or services without a substantial physical presence in Maine will be subject to the state's sales tax when they enter into certain commission-based referral agreements with persons located in the state or when they engage in certain activities with affiliates maintaining a substantial in-state presence because such agreements and activities create a rebuttable presumption of nexus, according to legislation enacted in Maine. [H.B. 251, enacted 6/5/13]

The legislation creates a presumption that a seller is engaged in business in the state through the activities of affiliated persons which have a substantial presence there. Specifically, certain in-state activities performed by persons that are members of the same controlled group of corporations as the seller are attributable to the seller for purposes of creating nexus. Among the in-state activities performed by such persons that will effectuate the creation of nexus are:

• selling a similar line of products under the same or a similar business name as the seller;

• maintaining an office, distribution facility, or storage place in the state to facilitate delivery of the seller's property or services;

• using the same or similar trademarks, service marks, or trade names as the seller in the state;

• facilitating the seller's in-state delivery of property by allowing customers to pick up property at an office, distribution facility, or storage place; and

• conducting any activities in the state that are significantly associated with the seller's ability to establish and maintain a market in Maine.


However, sellers may rebut this presumption by demonstrating that the affiliate's in-state activities are not significantly associated with the seller's ability to establish or maintain a market in the state.

“Click-Through” Nexus

The presumption is also raised against sellers entering into so-called “click-through” agreements, in which sellers compensate in-state persons for placing links on their websites that, when clicked, direct internet users to the seller's website.

In addition to internet links, the referrals can be made by telemarketing or by in-person presentations. For the presumption to apply, sellers must have cumulative gross receipts in excess of $10,000 from in-state retail sales under such agreements.

Sellers may also rebut this presumption by submitting proof that the person with whom they contracted with did not engage in any activity in the state that was significantly associated with the seller's ability to establish or maintain a market there.

Controversial Trend

The legislation is a part of a growing trend among states to expand their nexus criterion based on certain in-state activities of remote sellers for the purpose of collecting sales tax.

Multiple states have enacted similar affiliate and click-through nexus legislation and this appears to be Maine's attempt to “jump on the bandwagon,” according to Sarah Beard, partner at Pierce Atwood in Portland, Maine. Indeed, Maine is the twelfth state to enact legislation creating nexus via click-through agreements and they have followed the direction of all but three of the other enacting states by including a rebuttable presumption.

Affiliate and click-through nexus legislation, however, remains a controversial area. The Maine legislation, according to Beard, “goes too far,” in the sense that the activities it targets are not enough to create nexus with the state. Accordingly, as Beard commented, it will be interesting to see what sort of impact the rebuttable presumption will have in this regard.

According to Arthur Rosen, partner with McDermott Will & Emery in New York, most affiliate nexus and other corporate group taxation legislation run counter to current prevailing law and allowing the compensation aspect of click-through agreements to dictate whether an activity is considered nontaxable advertising and taxable solicitation is arguable.

The legislation takes effect 90 days after adjournment of the 2013 legislative session, which scheduled for June 19.

Full text of the legislation is available online at

For a discussion of substantial nexus as it pertains to internet sales and electronic commerce, see 1420 T.M., Limitations on States' Jurisdiction to Impose Sales and Use Taxes, at 1420.06.E.8. For a general discussion of affiliate nexus, see 1420.06.B.