Weekly Round-up: 'Amazon Laws' Come Under Fire

Friday, October 7, 2011

Weekly Round-up: “Amazon Laws” Come Under Fire

Five states enacted so-called “Amazon” or “click-through nexus” laws in 2011, but a panel of state tax experts, speaking in an Oct. 5 BNA Tax & Accounting webinar, questioned the constitutionality of the laws and said they expected them to be challenged in some jurisdictions.

Since 2008, eight states have enacted similar laws aimed at taxing sales to in-state customers by out-of-state internet retailers. Among those states is California, but the state recently suspended its “click-through nexus” law for a year, pending enactment of federal legislation addressing the issue. If no federal law is enacted before Sept. 15, 2012, the state's “Amazon” law will be reinstated.

The general approach to establishing nexus under click-through 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.

However, panelist Arthur R. Rosen, a partner with McDermott Will & Emery LLP in New York, said he does not believe that all click-through 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,” he said.

In many cases, the activities of an in-state internet affiliate most likely falls short of this standard, said 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, she said.

The full article on this issue can be read in its entirety here.

In other developments,

Sutherland releases its September 2011 issue of Salt Shaker.

Morrison & Foerster’s October 2011 issue of New York Tax Insights provides, among other things, an update on partial relief from responsible person liability.

Alabama highlights new assignments in the state’s Revenue Department.

By Steven D. Roll
Follow us on Twitter at: @SALTax
Join BNA's State Tax Group on LinkedIn here: http://www.linkedin.com/groups?gid=1821701&trk=hb_side_g