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)