Over the past few years, several states have enacted laws imposing “affiliate” or “click-through” nexus on online vendors with associates located within their borders. These states are Arkansas, Connecticut, Illinois, New York, North Carolina, and Rhode Island. A provision enacted by Vermont last year takes effect after 15 other states have adopted click-through nexus.
After Connecticut enacted a so-called “Amazon” law in 2011, the state’s Commissioner of Revenue claimed that online retailers with in-state affiliates were subject to sales and use tax reporting and collection requirements even before the measure took effect.
Tax agencies in other states, such as Pennsylvania, maintain that affiliate or click-through nexus laws apply even though the state has not enacted such a provision. In December, the Pennsylvania Department of Revenue issued Sales and Use Tax Bulletin 2011-01, which it characterized as a reminder to several types of remote vendors that they are subject to sales and use tax requirements.
Many other state tax agencies for jurisdictions that have not enacted an affiliate nexus provision believe that remote vendors with in-state associates have a duty to collect sales and use tax, according to the Bloomberg BNA 2011 State Tax Department Survey (April 22, 2011). These states are:
Some prominent state and local tax practitioners do not believe affiliate nexus laws pass constitutional muster. Under Tyler Pipe v. Washington State Dept. of Rev., 483 U.S. 232 (1987), 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,” said Arthur R. Rosen in a Bloomberg BNA Webinar last year.
In many cases, the activities of an in-state internet affiliate most likely fall short of this standard, said webinar panelist Annette Nellen, a professor at San Jose State University. Some affiliates do no more than post a link to a remote seller's website. The in-state affiliate is typically not involved with the sale once a consumer accesses the remote seller's website, she observed.
Other state tax experts believe that the affiliate nexus laws are constitutional under Scripto v. Carson, 362 U.S. 207 (1960), a case in which the high court found nexus based on the activities of independent contractors in a state. But even some of those taking this position believe that states should specify that they are adopting this approach.
“Since Scripto in 1960 there should be no legal question about requiring Amazon under a properly drafted state statute to collect use tax based on their use of associates,” said Professor Richard Pomp at a recent Bloomberg BNA State Tax Advisory Board Roundtable. “But if a state has never taken that position, I’d be a little hesitant without at least clarifying the statute to make it clear that this is the way we are interpreting Scripto.”
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)