State Tax Snapshot: More States Likely to Jump on Affiliate Nexus Bandwagon in 2012


After a brief lull in 2010, when no states enacted an affiliate nexus provision, 2011 saw Arkansas, Connecticut, Illinois, and Vermont all adopt such a law. Meanwhile, California enacted an affiliate nexus law last year only to repeal it after it struck a deal with Amazon in which the law would be revived if a federal solution is not reached by September 2012.

But the political prospects of Congress enacting such a measure are anything but clear.

The general approach to establishing nexus under affiliate nexus laws is based on the online retailer's agreements with in-state residents who refer customers via a web link to the retailer's website. The legislation typically provides that a remote seller must register as a vendor and collect sales tax if it:

  • contracts with residents who link to the remote seller's web page and are paid a commission, and
  • generates more than a threshold amount of sales from the residents' links.

Other states, such as Arizona, New Jersey, and Virginia have legislation pending that would create a presumption of nexus based upon the existence of a distribution center or related entity in the jurisdiction.

Judging from the number of affiliate nexus bills pending in state legislatures, it looks as though additional states will take matters into their own hands by enacting a click-through nexus law in 2012.

States with affiliate nexus bills pending include:

  • Arizona S.B. 1338 : Expands the definition of “retailer” to include any person who makes sales of tangible personal property that are for storage, use, or other consumption in Arizona if any other person maintains a distribution center, warehouse, fulfillment center or similar place of business within Arizona that facilitates the delivery of property sold by the person to the person’s customers. Status: Pending in House.
  • Kansas   S.B. 430: Creates a presumption of nexus for a retailer that enters into an agreement with one or more Kansas residents under which the resident, for a commission or other consideration refers potential customers, whether by a link on a website, by telemarketing, by an in-person oral presentation, or otherwise, to the retailer, if the cumulative gross receipts from sales by the retailer to customers in the state who are referred to the retailer by all residents with this type of an agreement with the retailer is in excess of $10,000 during the preceding 12 months. Status: Pending in Senate Committee on Assessment and Taxation.
  • Mississippi   H.B. 135: Creates a presumption of nexus for a vendor that enters into an agreement with a resident of the state under which the resident, for a commission or other consideration refers potential customers, whether by a link on a website or otherwise, to the person. Status: Pending in House Ways and Means Committee.
  • Missouri   H.B. 1569: Specifies that soliciting business through an independent contractor or other representative includes a business that enters into an agreement with a resident of Missouri for a commission or other consideration and the resident refers potential customers by a link on the internet or otherwise to the seller if the cumulative gross receipts from sales by the seller to customers in Missouri who are referred by all residents with agreements with the seller exceeds $10,000 during the preceding four quarters. Status: Pending in House Tax Reform Committee.
  • New Jersey   S.B. 905: Includes within the definition of a “seller” a person who makes sales of tangible personal property through a subsidiary or other related entity, to purchasers in New Jersey by mail, telephone, the internet or any other media, and who has a contractual relationship with an entity to provide and perform delivery, installation, assembly, or maintenance services for that person’s purchasers within the state. Status: Pending in Senate Economic Growth Committee.
  • Virginia   S.B. 597: Creates a legal presumption to require registration by a dealer for collection of retail sales and use taxes if any commonly controlled person maintains a distribution center, warehouse, fulfillment center, office, or similar location within the Commonwealth that facilitates the delivery of property sold by the dealer to its customers. Status: Pending in House.

In state legislatures across the country, few bills that are introduced are enacted. But the number of click-through nexus bills pending in the various states could indicate that more jurisdictions are likely to adopt provisions aimed at capturing revenues generated by remote sellers.

This sentiment was echoed by Joe Huddleston, executive director of the Multistate Tax Commission at a recent Bloomberg BNA State Tax Advisory Board meeting. “[B]ecause of the economic crunch, a lot of these states out of an abundance of caution have passed these Amazon-type statues like New York and I think more will,” he said.

By Steven Roll
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