Sales Tax Slice: The Nexus Bandwagon – Who’s on Board for Change?


While many of us have been fixated on tracking and discussing the merits of the Marketplace Fairness Act, sales and use tax nexus developments have surfaced in West Virginia, Kansas, New Mexico, and Colorado.

 

West Virginia recently enacted legislation containing affiliate nexus provisions, which become effective July 12, 2013. The legislation expands the definition of "retailers engaging in business in this state" to include retailers that are part of a unitary business with persons or entities maintaining a place of business in the state, or having agents performing services or directly soliciting business there.  As discussed in a Bloomberg BNA Weekly State Tax Report article, concerns have been raised regarding whether the language used for "service" and "solicit" is extremely broad and would extend to print and internet advertising.

 

Ready for significant change, Kansas enacted legislation revising nexus and affiliate nexus provisions, and creating click-through nexus provisions. Notably, the legislation also adds a section specifying that the presumptions (other than the click-through provisions) are rebuttable. Kansas also issued guidance regarding these remote retailer provisions, which become effective July 1, 2013.

 

With a pocket veto, New Mexico declined the opportunity to amend its definition of "engaging in business." Interestingly, the revised definition would have specified that the term does not include "having a worldwide web site as a third-party content provider on a computer physically located in New Mexico but owned by another nonaffiliated person" or "using a nonaffiliated third-party call center to accept and process telephone or electronic orders of tangible personal property or licenses primarily from non-New Mexico buyers, which orders are forwarded to a location outside New Mexico for filling, or to provide services primarily to non-New Mexico customers."

 

Colorado issued General Information Letter GIL-12-016 explaining that if a company is a component member of a controlled group containing a retailer with a physical presence in Colorado, the company is considered to be doing business in the state, and that the state's affiliate nexus rules apply to state-administered local jurisdictions.  Colorado advised that the company will have nexus in a particular city and county if one of its subsidiaries has nexus in that city or county, and the company has affiliated nexus at the state level. However, in General Information Letter GIL-12-019, Colorado declined to provide guidance on whether an out-of-state corporation would have nexus if an employee who processes and completes internet sales for the corporation moves to Colorado.

 

The states continue to revise their nexus provisions and provide clarification for retailers under the existing physical presence standards and Quill, but if the Marketplace Fairness Act becomes law (and right now we can only speculate as to whether, and subject to what revisions, it makes it out of the House and onto the President's desk), we may see more states joining the SST or a "minimum simplification" bandwagon.

 

By Christine Boeckel

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