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Do website banner ads, email marketing, or e-commerce servers create sales tax nexus?

Full Question: Do website banner ads and email marketing campaigns that are served up outside of California create a nexus in some states? Is a nexus created if the server that hosts my e-commerce website and managed by a third-party vendor is located in another state? If I have a third party dealer who is located in another state who actively promotes my products and I receive an direct online order from a retail customer in that state, are there situations where the dealer might create a nexus between my company and that state?

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Answer:

Diane Yetter photoYour question is a very complex one that unfortunately doesn't permit a general answer. However, here are some comments and thoughts. We can work with you to help you identify the specific issues and risks in the states where you do business. In general, having a website banner ad and email marketing campaign served up outside of California shouldn't create nexus. However, states are getting more aggressive in this area and are looking at legislation that could create a collection responsibility for these types of activities if there is compensation paid for the referral sale. Laws exist covering this today in NY, NC and RI. Other states are looking at this and this list could grow. Nexus could be created based on the third-party vendor hosting your web site in another state. This is most likely if you own any of the equipment located at the hosting company. Some states may consider what you are doing a nexus creating activity particularly if you are "renting" equipment from the supplier. If you have a third party dealer who is doing sales and marketing activities on your behalf, this likely does create nexus for you. The presence in a state of people, even if they are independent agents, making sales on your behalf generally does fall into the definition of retailer doing business in the state.

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