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We sell internet based webinars. Customers are all over USA. Any nexus issues?

Full Question: We are offering internet based webinars that offer Continuing Education to customers. Customers are recruited solely via the internet using ad words, email lists, etc. We are charging the customers for participation in the CPE presentation. Operations are in Massachusetts. Customers are all over the country (in fact all over the world). Any nexus issues? Now--what happens if we attend a trade show in another state (once a year) to market? Have we created nexus in that state? What happens if we hire presenters in a given state? Does that create nexus in that state? What states might tax this service of webinars and therefore it might make sense to file a zero sales tax return just to protect oneself? Or would be advisable to NOT register for sales tax in a given state--I've read that creates nexus.

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Answer:

Diane Yetter photoYour question requires first a discussion of nexus and secondly the determination of taxability. The questions you pose are not clear cut and so this response is more general in nature. We would be happy to work with you to help you evaluate the more complex issues you have raised. First, The determination as to whether you are required to collect sales tax on sales into other states depends on whether you have established nexus in the state of delivery - or in your case the state where the online training is "enjoyed". If you are based in Massachusetts and sell to customers located throughout Massachusetts, you will be required to collect Massachusetts sales tax on all taxable sales regardless of the method of solicitation. If you sell to customers in other states, then you must determine if you have established nexus in the state of delivery. The general rule is that in order to establish nexus you must have a substantial physical presence either through people or property. However, some states, including New York, Rhode Island and North Carolina have recently passed laws know as the "Amazon" laws which create a presumption of nexus through affiliate activities. Depending on your online advertising and compensation plan, you may create a presumption of nexus in these states. In terms of the other activities you mention - attendance at trade shows and hiring presenters, these may or may not create nexus. States vary on whether they permit a company to exhibit at a trade show without creating nexus. If you are hiring presenters, this likely can create nexus if it exceeds threshold standards by each state. Second, in terms of the taxability of the webinar services, this is a developing area of taxability. There are very specific provisions that would need to be evaluated in order to make a taxability determination. Some issues that need to be considered include whether the customer receives any "goods", whether the service is considered a taxability information service, whether the services is considered database access, whether the service is really defined as computer software by the state, among others. We would be happy to assist you in the evaluation of your nexus position as well as assist you with a taxability analysis of your products and services.

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