A Click-Through Nexus Debate and Other Developments


So-called “click-through nexus” or “Amazon laws” do not impose an unreasonable burden on interstate commerce, Connecticut's revenue services director Kevin Sullivan argued during a June 30 BNA Tax & Accounting webinar.

Rather, Sullivan said, the laws impose a tax collection and remission responsibility on remote vendors that is equal to that borne by other sellers doing business in the state.

“Overstock and others are actually fighting to preserve an unfair trade advantage…and it's not even clear that there is any material economic benefit in offering the appearance of tax-free pricing compared to the reasons of convenience and choice that primarily motivate online shoppers,” he said.

Many online vendors, Sullivan noted, are already equipped with automated information systems that can easily and inexpensively handle sales tax notice, collection, and remittal obligations.

Amazon.com currently sells other merchants' products on its platform and collects tax on their behalf, added Louis Bucari, first assistant commissioner and general counsel for the Connecticut Department of Revenue.

“Each of these online merchants may have different sales tax collection obligations, depending upon their business policies and the location of their operations,” Bucari said. “Amazon.com calculates sales taxes on the merchants' behalf in accordance with their instructions. These instructions vary depending on the tax laws in each state.”

But, Arthur R. Rosen, a partner with McDermott Will & Emery LLP in New York, believes that not all click-through nexus laws pass constitutional muster.

Under Tyler Pipe v. Washington State Dept. of Rev., the test for determining whether an in-state person creates attributional nexus for an out-of state person is whether the activities of the out-of-state person are “significantly associated with the seller's ability to establish and maintain a market in the state,” he said.

But Connecticut's click-through nexus provision merely looks to whether the out-of-state seller pays for “referrals” using in-state websites based on a percentage of sales, Rosen said.

He added that unlike New York's click-through nexus law, which creates a rebuttable presumption of nexus, Connecticut's statute is not rebuttable and makes no provision for in-state website owners to certify that they are not engaging in solicitation activities for an online retailer.

One way for remote online vendors to avoid running afoul of Connecticut's click-through nexus law, Rosen said, “is not to compensate third parties in the state based on sales, but rather, for example, on a per-click basis—but that may have obvious business disadvantages.”

In other developments this week, The Los Angeles Times is telling its readers that “Amazon.com and other large out-of-state retailers will be required to collect sales taxes on purchases that their California customers make online.” However, as usual, the new law coming out of California is not that simple. As Sutherland’s SALTonline reports, certain thresholds must be met before the new collection duty kicks into place.

For a closer look at the controversy surrounding New Jersey's stored value card law, check out a new article written by Kendall Houghton and Maryann Luongo, both with Alston & Bird, for BNA's Weekly State Tax Report.

The budget battle in New Jersey has taken an ugly turn as insults are hurled, Kelly Phillips Erb, the resident Taxgirl at Forbes, reports.

The Center on Budget and Policy Priorities has issued a new report tracking major cuts in public services made by states in their 2012 fiscal year budgets and the impact of these cuts on taxpayers.

John Greene is named as the new Director of the Arizona Department of Revenue by Governor Jan Brewer. David Raber has been named as Chief Deputy Director and Vince Perez will be the new Deputy Director.

Economist David S. Logan, formerly of the Brookings Institution, has joined the Tax Foundation and will focus on state tax issues.


By Steven D. Roll and Priya D. Nair