Sales Tax Slice: Five Q4 Nexus Changes Online Retailers Need to Know--Number Four Will Shock You


With Labor Day behind us, our white pants and disco shoes tucked away, the holidays are now near. Many retailers depend on holiday sales to buoy their profits. States, likewise, look to these as a source of sales and use tax revenue. This fall a record number of states will be looking to online retailers for this revenue. 

Below are the top five changes to state nexus laws happening this fall. 

1. Washington’s click-through nexus legislation was the first to go into effect from this list. Effective September 1st, it created a rebuttable presumption of nexus for online retailers with more than $10,000 in annual Washington sales resulting from click-through advertising arrangements with residents of the state. 

2. Nevada enacted an affiliate nexus bill earlier this year containing a click-through nexus provision similar to Washington’s that will go into effect on October 1st. Also effective October 1, the bill includes a separate provision under which retailers will be rebuttably presumed to have nexus with Nevada if they have an affiliate performing any of the following activities in the state:

• selling a similar line of products or services as the retailer and doing so under a business name that is the same or similar to that of the retailer;

• maintaining an office, distribution facility, warehouse, storage place, or similar place of business in Nevada to facilitate the delivery of tangible personal property sold by the retailer to the retailer's customers;

• using trademarks, service marks, or trade names in Nevada that are the same or substantially similar to those used by the retailer;

• delivering, installing, assembling, or performing maintenance services for the retailer's customers in Nevada; or

• conducting any other activities in Nevada that are significantly associated with the retailer's ability to establish and maintain a market in Nevada for the retailer's products or services. 

3. Under legislation also effective October 1st, Michigan enacted a click-through nexus provision similar to Washington’s and Nevada’s. For the presumption of nexus to apply, Michigan adds a requirement that the retailer have more than $50,000 in annual gross receipts from sales to its residents. Also effective October 1st, the bill includes a separate provision under which retailers will be rebuttably presumed to have nexus with Michigan if they have an affiliate performing any of the following activities in the state: 

• selling a similar product line as the retailer under the same or a similar business name;

• using its employees, agents, representatives, or independent contractors in Michigan to facilitate the retailer's sales to purchasers in Michigan;

• maintaining, occupying, or using an office or similar place of business in Michigan to facilitate the delivery or sale of tangible personal property sold by the retailer to the retailer's purchasers in Michigan;

• using, with the retailer's consent or knowledge, trademarks, service marks, or trade names in Michigan that are the same as or substantially similar to those used by the retailer;

• delivering, installing, assembling, or performing maintenance or repair services for the retailer's purchasers in Michigan;

• facilitating the sale of tangible personal property to purchasers in Michigan by allowing them to pick up or return tangible personal property sold by the retailer at an office, distribution facility, warehouse, storage place, or similar place of business maintained by that person in Michigan;

• sharing management, business systems, business practices, or employees with the retailer, or, for an affiliated person, engaging in intercompany transactions related to the activities occurring with the retailer to establish or maintain the retailer's market in Michigan; or

• conducting any other activities in Michigan that are significantly associated with the retailer's ability to establish and maintain a market in Michigan for the retailer's tangible personal property sales to purchasers in Michigan. 

4. Surprise! Observers expect Vermont’s click-through nexus law to go into effect on December 1st. Many online retailers will still be in their post-Black-Friday refractory period. If you’ve been tracking state nexus legislation this year, you might have missed this one. Vermont passed its click-through nexus law back in 2011, but the law still hasn’t gone into effect. Whoa!? That’s because Vermont’s click-through nexus law is not set to go into effect until the state’s Attorney General determines that at least 15 other states have similar nexus provisions. With Nevada, Michigan, and Washington bringing this number to 17, Attorney General William Sorrell is expected to declare next month that this requirement has been met. The Vermont Department of Taxes has announced that if he does so, it will implement the click-through nexus law effective December 1st

5. In the spirit of the holidays, effective October 1, Alabama is offering online retailers not otherwise considered to have nexus the opportunity to voluntarily collect and remit tax on sales to Alabama customers. Qualifying retailers that elect to do so will be permitted under the Simplified Sellers Use Tax Remittance Program to collect tax at a flat combined state and local rate of 8 percent, regardless of the combined rate applicable in the jurisdiction where the customer is located. Online retailers must apply to participate and will be permitted to keep 2 percent of the tax that they collect under the program. 

In case the 2 percent collection discount is not a sufficient incentive to voluntarily collect and remit, as previously reported by Bloomberg BNA’s Chris Marr in the Weekly State Tax Report, the state is considering a rule under which all online retailers with annual sales greater than $250,000 would be required to do so. 

Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn: How shocked were you by Number 4? 

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