When I wrote my first post for the SalesTaxSupport.com blog back in July of 2011, I wrote about State “Amazon Laws" - what these laws are and which states had enacted an “Amazon Law". I also posed the question on whether the trend toward enacting these expansive, click-through, presumptive nexus laws was likely to continue, whether the trend might be considered “the new normal”. And indeed, that first SalesTaxSupport.com post was aptly titled, “Amazon Laws: The New Normal? Internet Sales Tax Law Update”.
In the months that followed the publication of that initial post, we witnessed the eruption and unraveling of what could be considered the biggest state “Amazon Law" development of 2011. I’m speaking, of course, about the explosive developments that began with California’s enactment of its “Amazon Law" and which ended with the temporary repeal of this controversial law. (If you missed the California “story”, you can read about California’s “Amazon Law" enactment and demise at my prior posts “California Enacts Explosive ‘Amazon Law’!”, “Amazon Law (& Order). The California Season Summary…”, and “A Tale of Two States - The “Amazon Law” Saga Continues”)
But by the time the focus on this significant state “Amazon Law” development had quieted, the attention had turned to the introduction of the first of three Federal proposals that would require out-of-state (“remote”) sellers to collect sales tax in states in which their customers were located without regard to nexus. This first proposal, the Main Street Fairness Act (S. 1452/H.R. 2701) was introduced on July 29, 2011. By the end of 2011, two more proposals were on Congress’ agenda; the Marketplace Equity Act (H.R. 3179) introduced on October 12, 2011, and the Marketplace Fairness Act (S. 1832), introduced November 9, 2011. (To read my prior posts on each of these proposals, click on each Act’s name.)
And although state “Amazon Law" developments didn’t cease during the latter half of 2011, the Federal proposals quickly became the main focus as everyone wondered whether a “Federal solution” to close the “internet sales tax loophole” would finally pass.
But in the last few months, States have been quick to reclaim the spotlight! And suddenly it seems as though “Amazon” legislation is being introduced everywhere!
While many of these recent State proposals seek to expand nexus (for sales tax collection purposes) by asserting that an in-state marketing affiliate’s web-link to an out-of-state (“remote”) retailer’s site is sufficient to create an in-state presence for the remote retailer, some of the recent proposals are taking a broader, or at least different, approach by asserting that the in-state ownership of a distribution or other facilities owned or operated by related taxpayers may also create nexus for the remote retailer.
So which states have recently introduced nexus expanding legislation? Here’s a quick overview of the states and approach they are taking.
- Arizona S.B. 1338 – (Introduced by Arizona Senators Al Melvin and John McComish, and Representatives Justin Olson and J.D. Mesnard on January 28, 2012) S.B. 1338 expands the definition of a “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. S.B. 1338 also states that the presumption of nexus created by owning or maintaining such property is rebuttal by demonstrating that the activities conducted by the person maintaining the distribution center, warehouse, fulfillment center or similar place of business are not significantly associated with the person’s ability to establish or maintain a market for the person’s sales in Arizona. This Arizona proposal cleared the Senate Commerce Committee on February 8, 2012 and is currently pending in the House. (See 3/8/12 update below.)
- Kansas S.B. 430 – (Introduced by the Senate Ways and Means Committee on February 15, 2012) S.B. 430 is a click-through nexus provision with a small seller exception, which provides that a presumption of nexus is created 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. The presumption of nexus can be rebutted by submitting proof that the residents with whom the retailer has an agreement did not engage in any activity within the state that was significantly associated with the retailer’s ability to establish or maintain the retailer’s market in the state during the preceding 12 months. If passed, this affiliate nexus law would become effective 90 days after enactment. S.B. 430 was referred to the Senate Committee on Assessment and Taxation on February 16, 2012, where it is currently pending.
- Minnesota H.F. 1849 - (Introduced by Minnesota Representatives Greg Davids, Bev Scalze, and Tina Liebling an January 24, 2012) H.F. 1849 is another click-through nexus provision with a small seller exception which defines a “solicitor” as a person who solicits business for the retailer and provides that “a retailer is presumed to have a solicitor in this state if it enters into an agreement with a resident under which the resident, for a commission or other consideration, directly or indirectly refers potential customers, whether by a link on an Internet Web site, or otherwise, to the seller and the total gross receipts from sales to customers located in the state who were referred to the retailer by all residents with this type of agreement with the retailer is at least $10,000 in the 12-month period ending on the last day of the most recent calendar quarter before the calendar quarter in which the sale is made. This presumption of nexus is rebuttal if the resident with whom the retailer has an agreement did not engage in any solicitation in the state on behalf of the retailer that would satisfy the nexus requirement of the U.S. Constitution during the 12-month period in question. If passed, this affiliate nexus law would become effective on June 30, 2012. Upon introduction, H.F. 1849 was referred to the House Committee on Taxes where it is currently pending.
- Mississippi H.B. 135 – (Introduced by Mississippi Representative Jessica Upshaw on February 7, 2012) H.B. 135 is a click-through nexus proposal with no small seller exception, which states that a presumption of nexus is created 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. This presumption of nexus is rebuttal by proof that the resident with whom the person has an agreement did not engage in any solicitation in the state on behalf of the person that would satisfy the nexus requirement of the U.S. Constitution. If passed, this affiliate nexus law will be effective July 1, 2012. H.B. 135 was referred to the House Ways and Means Committee on February 7, 2012 where is it currently pending.
- Missouri H.B. 1569 – (Introduced by Missouri Representatives Doug Funderburk, Bill White and John McCaherty on January 31, 2012) H.B. 1569 is also a click-through nexus provision with a small seller exception that 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. The presumption of nexus may be rebutted by proof that the resident with whom the seller has an agreement did not engage in any solicitation in the state on behalf of the seller that would satisfy the nexus requirement of the U.S. Constitution during the four quarterly periods in question. If passed, this affiliate nexus law will be effective August 28, 2012. The House Committee on Tax Reform voted “do pass” of H.B. 1569 on March 1, 2012. The bill was immediately referred to the House Committee on Rules where it is currently pending.
- New Jersey S.B. 905 – (Introduced by New Jersey Senator Raymond Lesniak on January 17, 2012) S.B. 905 is a broad affiliate nexus proposal which expands the definition of a “seller” to include 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. The proposed legislation does not include a traditional click-through provision, therefore, the proposal does not include a small seller exception nor does it include rebuttal presumption language. Upon introduction, S.B. 905 was referred to the Senate Economic Growth Committee, where it is currently pending.
- Georgia H.B. 993 – (Introduced by Representatives Matt Ramsey, Matt Hatchett, Tom Taylor, Stacey Abrams, Delvis Dutton, and Jon Burns on February 16, 2012) H.B. 993, a relatively short proposal, is a click-through proposals with a small seller exception which require out-of-state online retailers to collect state sales tax if the out-of-state retailer had least $10,000 in annual sales through in-state affiliates receiving a commission in order to be subject to collecting the tax. If passed, this provision would become effective upon its approval by the Governor or upon its becoming law without such approval.
So there you have it, a recap of a handful of recent state “Amazon” and other nexus expanding proposals – all introduced since the first of the year! But these aren’t the only developments! Notably absent from above is “Amazon” legislation currently being considered in Florida and Virginia – two states where these developments are causing a flurry of excitement. For one, Amazon is attempting to negotiate a “deal” which includes building facilities and adding jobs in exchange for a delay in the sales tax collection requirement that would arise if Florida or Virginia pass an "Amazon Law". In Florida, there have been several complementary proposals that have surfaced, some in response to the Governor’s mandate that any new law must be revenue neutral. In Virginia, S.B. 597, a broad proposal which would “create 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” appears very close to being finalized. Just two days ago, on the evening of March 5th, the Virginia General Assembly gave final approval to Senate Bill 597. Needless to say, developments in these two states may be worthy of their own post.
So what gives? Why the renewed focus on enacting "Amazon Laws" by legislatures in so many states. Are the states convinced the Federal proposals will die once again? As of today, March 7th, all of the Federal Proposals are still "alive". According to www.govtrack.us, a site which tracks the status of U.S. bills, S. 1452, H.R. 2701, H.R. 3179 and S. 1832 are in “committee”, the first step in the legislative process. So while these bills may all be "alive", perhaps they no longer "kicking". There's no doubt that all the excitement that followed the introduction of these Federal proposals in the latter half of 2011 has quieted - and significantly! Perhaps the states have sensed that it's time again, to take action into their own hands. Even after some of the state craziness that occurred in 2011 - such as California's high-profile, unsuccessful, attempt to put into place its "Amazon Law", or the mass exodus of affiliate marketers that left Illinois after it passed its "Amazon Law" - even after all that, perhaps the states have had enough and are willing to take whatever action needed to reach that "pot of gold". Whatever the case, you'll want to stayed tuned - I’m certain there is more to come.....
Arizona - Within a day of this post being published, Arizona S.B. 1338 was defeated. On Thursday, March 8th, the Senate voted 20-8 vote against the bill. Interestingly, media reports coming out of Arizona are that the some Arizona Senators felt the bill was flawed, that it targeted one company - Amazon.com, and that it would dissuade other businesses from relocating to the state.
Georgia - On Thurs, 3/22, the Georgia General Assembly passed by a vote of 54 to zero, an omnibus tax bill, H.B. 386, which essentially combines a series of recycled proposals into a single large package. One of the many provisions in H.B. 386 is a click-through rebuttable presumptive nexus provision applicable to remote sellers who enter into contracts with in-state marketing affiliates (this provision includes a small seller exception – sales generated by all in-state affiliate web-links must have exceeded $50,000 within the prior 12 month period). From a review of the legislative history, it appears as though Georgia H.B. 993 (discussed above) has been rolled into H.B. 386. This bill is on its way to Governor Deal’s desk.
Missed my last post? Catch it here: "Sales Tax Act - Main Street or Marketplace. Is SST Issue Key?"
What’s up next? "Florida and Virginia Updates: Amazon Makes More 'Deals' ", "What Ever Happened to those Federal Proposals?", "How 'Amazon Laws' Impact Affiliate Marketers", "More State Amazon Updates", and much, much more...
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