In the past few weeks, I've been reminded of how those of you with sales tax responsibilities (and those of you who dabble in sales tax) are genuinely interested in solid, practical sales tax information. Those reminders have come not only from my lovely editor here at SalesTaxSupport.com (I mean this is a sales tax resource and information website, right?) but also as a result of some recent events I’ve participated in, like an Avalara Sales Tax Community Q&A session and a Strafford Sales Tax Webinar for retailers.
So today, as opposed to blogging about new or developing “Amazon” legislation, I thought I’d refocus and talk more generally about Amazon Laws. I’m sure you’ll agree, there’s been no shortage of “Amazon” developments lately!
You see, I believe there’s a lot of confusion about which states have enacted an “Amazon law" and what that law looks like, or should I say – what type of “nexus” provision it includes. If you're following "Amazon law" developments - you're probably like me in that you're constantly reading everything related to this exciting topic! If so, you've probably noticed how articles will often quote conflicting information about the number of states that have enacted "Amazon laws". But you see, that number may vary because there are various types of "Amazon" provisions.
That’s right, not all "Amazon laws" are created equal!
So, let's get things moving and take a look at the various types of "Amazon law" provisions.
Let’s first take a look at the type of Amazon provision that most people think of when they hear the phrase “Amazon law” – the “click-through” nexus provision. States that have enacted a “click-through” nexus law have essentially taken the position that in-state marketing affiliates create a physical presence (that satisfies the Quill requirement) for the out-of-state (remote) retailer with whom they contract. Because the in-state marketing affiliates (individuals and businesses) indirectly refer customers to the remote retailer's on-line store, contracting with in-state marketing affiliates creates a "nexus presumption." Although “click-through” nexus is probably the most common term used to refer to this type of Amazon provision, other terms used to describe this type of nexus provision include “web-linking”, “affiliate tax” and “presumptive.”
Affiliate (Related Party) Nexus
Recently, we’ve seen more and more states enacting “Amazon laws" that focuses on nexus being created for a remote retailer when a related party, such as subsidiary or other commonly owned entity, owns or leases property, such as a distribution center, in a state; performs services on the goods or property that are sold by the remote retailer; uses common trademarks in the state; or in general, engages in other specified activities that enhance the remote retailer’s market in the state.
Now, let’s stop here for a minute and focus on the term “affiliate.” Whenever I present on this topic I like to spend a few moments talking about the confusion that the term “affiliate” creates. As I just mentioned in the “click-through” nexus section, Amazon laws are sometimes referred to as “Affiliate Tax” Laws because of the marketing affiliate connection. But legally “affiliate nexus” actually refers to the related party (as in a corporate affiliate) nexus I’m describing here. See? Confusing!
The point is – to understand how a particular Amazon law impacts your business or your clients or customers, it’s important to understand what type of nexus provision is being discussed and that the term “affiliate” is used in various ways.
Here’s another point, many of the states that have “click-through” nexus provisions also have an affiliate (i.e. related party) nexus provision. That's right, some states have taken the position that a “click-through” provision isn’t enough. Think back to all the situations where Amazon and Overstock severed their marketing affiliate contracts in states that enacted click-through nexus laws. Adding a “related party” nexus provision is a way for states to ensure that the big on-line retailers will still have nexus to their state even if they sever their contracts with their in-state marketing affiliates. Incidentally, a recent trend in some states has been to focus only on the in-state activities of related entities creating nexus and forgoing a “click-through” nexus provision altogether.
Notification and/or Reporting
Then, there’s an entirely different approach that a few other states have taken. Instead of trying to assert nexus, these states have focused on imposing a transaction notice requirement. Essentially, although remote retailers aren't required to register to collect tax, states with notification laws require remote retailers to notify their in-state customers of their use tax remittance responsibilities. Thus, the goal of notification laws is to increase self-reporting and payment of use tax by in-state purchasers – although some would argue that the goal is to force mega on-line retailers, like Amazon, to register to collect the tax. And so, these notification and/or reporting laws are sometimes (but not always) lumped into the “Amazon law” category.
See what I mean about how Amazon laws can vary? Now that I’ve covered some basics – I’m sure you’re wondering which states have enacted an “Amazon” law and what type of provision the law includes. Here's a high-level chart summarizing this information.
|State||Year Enacted||Type of "Amazon" Law Provision/Comments|
|2011||Click-through, Affiliate (related party)|
|California||2011 (see comment)||Click-through, Affiliate (related party) (Note: California's law was original enacted in 2011, then temporarily repealed. It became effective on 9/15/12)|
|Colorado||2010 (N&R), Also 2014 (click-through and affiliate - See Note A below)||Notification and Reporting (Note: On 8/28/13, a 10th Circuit Court of Appeals reinstated Colorado's notification and reporting law. This action reversed a lower District Court's prior injunction of Colorado's law.
Also see Note A below re: Colorado's New Amazon Law enacted 6/6/14
|Georgia||2012||Click-through, Affiliate (related party)|
|Illinois||2011||Click-through (Note: Challenged. On 10/18/13, the Illinois Supreme Court held that Illinois’ click-through law was preempted by the Federal Internet Tax Freedom Act making Illinois' click-through nexus provision void and unenforceable.)|
|Maine||2013||Click-through, Affiliate (related party)|
|New York||2008||Click-through (Note: Challenged. New York's click-through nexus law was upheld by New York State Court of Appeals, the State's highest court. The case was petitioned to U.S. Supreme Court - Cert was denied on 12/2/13.)|
|Pennsylvania||2011, (See comment)||No enacting legislation, PA DOR clarified in Bulletin 2011-01 that activities such as engaging in-state marketing affiliates create nexus, remote retailers with nexus required to register by 9/1/12|
|Texas||2011||Click-through, Affiliate (related party)|
|Vermont||2011||Click-through, Notification(Note: Vermont's law not effective until 15 state pass similar legislation)|
|Virginia||2012||Affiliate (related party)|
So there you have it – an "Amazon law" overview. By the way, you may want to bookmark this page for future reference. Also, even though this is high level information, I’d be happy answer your questions about any of the various states’ Amazon provisions, so please free to add your questions in the comment section below.
By the way, here's another point of confusion - all the recent flurry about Amazon.com now collecting tax in several new states has simply added to all of the “Amazon confusion” since it isn't always clear whether Amazon.com started to collect because of an "Amazon law" or because the retailer entered into an agreement with the state. I'll be covering this topic in another post - so stayed tuned!
With the future of the Marketplace Fairness Act being uncertain, and with more states introducing Amazon type legislation - understanding the various types of Amazon provisions will continue to be very important!
Note A re: Colorado UPDATE: On June 6, 2014 (after this post was published), Colorado Governor Hickenlooper signed the Colorado "Marketplace Fairness and Small Business Protection Act" into law. This new law contains both a 'click-through' and affiliate (related party) nexus provision. You can read more at fellow blogger, Keith Critchton's June 27th blog post, "Colorado Redefines Nexus: The Law of Unintended Consequences"
Other recent “Internet Tax / E-Commerce” posts by Sylvia F. Dion, CPA:
- Amazon and Other "Nexus Expanding" Laws - By State Summary
- Economic Nexus: The “New Normal” or the Demise of Quill?
- Remote Transactions Parity Act: Comparing RTPA to MFA
- Marketplace Fairness Act: Dead, Alive - or in Legislative Limbo?
- Permanent Internet Tax Freedom Act Moves One Step Closer to Final Law