Skip Page Banner  
Skip Navigation

The Rise of Click-Through Nexus and What It Means to You

Product Code - TMA32
Speaker(s): Kevin B. Sullivan, Commissioner for the Connecticut Department of Revenue Services; Arthur R. Rosen, McDermott Will & Emery LLP; Jim Fier, Partner at Downey, Smith & Fier (Moderator)
Buy Now

Even as online sales have grown exponentially over the past 15 years, the states have generally been prohibited under the U.S. Constitution from imposing sales or use tax collection requirements on out-of-state vendors. Under the “physical presence” rule re-affirmed by the U.S. Supreme Court in Quill v. North Dakota, 504 U.S. 298 (1992), a vendor must be physically present in a state to become subject to the jurisdiction’s sales or use tax collection requirements.

Over the past few years some states have adopted policies that seek to avoid running afoul of the physical presence requirement. The trend began with New York, North Carolina, and Rhode Island enacting so-called “Amazon laws” or “click-through nexus” statutes which impose collection requirements on online vendors with sales “associates” located in the jurisdiction.
This year, Arkansas, Connecticut, and Illinois have all enacted similar laws. Click-through nexus measures are pending in California, Louisiana and other states.

Opponents of these laws argue that they unconstitutionally impose an obligation to collect sales tax on companies that lack a physical presence in the state. Last year, a New York appellate court upheld the state’s Amazon law, finding it not unconstitutional on its face because there could be instances where the in-state person's activities do - as a matter of fact - rise to the level of being "significantly associated" with the remote seller's ability to "establish and maintain" the in-state market. Accordingly, the court remanded the case to the trial court for further proceedings to develop the relevant facts.

The Webinar analyzed:

  • The theory 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 Connecticut intends to enforce its click-through nexus law, which takes effect July 1.
  • Practical planning approaches to consider to avoid running afoul of click-through nexus laws.
    • What lessons can be learned from similar cases involving other taxes, such as transient occupancy tax decisions for companies like Orbitz, Expedia, etc.

Upon completion of this program participants were able to:

  • Understand the theory behind 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
  • Learn how Connecticut intends to enforce its law
  • Consider some practical planning approaches to avoid running afoul of the laws.

Kevin B. Sullivan, Commissioner for the Connecticut Department of Revenue Services; Arthur R. Rosen, McDermott Will & Emery LLP; Jim Fier, Partner at Downey, Smith & Fier (Moderator)

Kevin B. Sullivan, Commissioner for the Connecticut Department of Revenue Services. Appointed by Governor Malloy in 2011 to serve as Connecticut’s Commissioner of Revenue Services, Commissioner Sullivan previously served as Connecticut’s Lieutenant Governor from 2004 to 2007. During this time, he regularly chaired the state’s Finance Advisory Committee and took on an active role in state policy.

Arthur R. Rosen is a partner in the law firm of McDermott Will & Emery LLP and is based in the Firm’s New York office. 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.

Jim Fier, CPA, is a partner at Downey, Smith and Fier, a state and local tax consulting firm in Lakewood, CA.  Prior to joining DSF, Jim served as the National Partner-in-Charge of Sales and Use Tax for Deloitte.  Jim focuses on sales and use and other gross receipt taxes advising clients in various industries, including e-commerce, retail, manufacturing, financial services, etc.  Prior to joining Deloitte, Jim began his career with the Board of Equalization in California, working in its compliance and audit divisions.  Jim holds a Masters of Taxation degree from the University of Southern California and a Bachelor of Science degree from San Diego State University.