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Click-Through Nexus: Michigan & Illinois Join Amazon Party

author photo of Jerry Donnini

Although nexus sounds like a terrible disease it is just means connection or link. If a company has enough of a connection or link to a state, then the state can force a company to abide by its laws. From a sales and use tax perspective a state can require the business to charge, collect, and remit state taxes such as sales tax. In 1992, Quill v. North Dakota was decided, which announced that having a physical presence in a state was sufficient nexus to require a company to follow a state’s state and local tax laws. In other words if your business has an office, a warehouse, some inventory, or a person (employee and yes, an independent contractor) then it likely has nexus under the physical presence test in Quill.

For life in the 1990’s this was big news to businesses who engaged in cutting edge marketing. Soliciting sales in innovative ways such as through floppy disks or mail order catalogs, states and businesses struggled with applying nexus to emerging technology. In current days, with the creation and evolution of ecommerce, nexus laws have struggled to keep up with companies engaged in soliciting sales over the internet. .

In 2008, New York did as many states in the 90’s did as it led the charge in morphing its nexus laws to keep with the shifting economy. What was known as the first of the “Amazon law,” due to its perceived targeting of Amazon, New York created a law that if a New York resident’s website generated over a certain number of sales in a 12 month period for a particular company, then there was a presumption that such company had nexus in New York. Amazon and Overstock took exception with this law, but ultimately lost at New York’s highest court. Unfortunately, the Supreme Court of the United States declined to hear the case.

As predicted, several states, actually 24 to date, have followed New York’s lead and created similar legislation. After all, if New York could get away with it and the Supreme Court of the United States won’t hear the case, then why wouldn’t a state be as aggressive as possible?

For the second time since 2011, Illinois has created its own version of the “Amazon law”. In addition, on January 15, Michigan followed suit and joined the “Amazon law” party. Both laws work similarly to the New York legislation in that a presumption of nexus is created if a resident of the home state solicits a sale for the out-of-state company. The idea is that a resident’s click through site is no different than having a sales rep in that state, which would give an out of state company nexus. Both provide a presumption if in state residents generate over $10,000 in sales in a 12 month period. Both states also are prime examples of a growing trend across the country to burden small and medium online businesses. Until the Supreme Court acts, then there is reason to expect the current count to grow beyond 24 states 2015.

About the Author: Mr. Donnini is a multi-state sales and use tax attorney and a shareholder in the law firm Moffa, Sutton & Donnini, PA, based in Fort Lauderdale, Florida. Mr. Donnini’s primary practice is multi-state sales and use tax as well as state corporate income tax controversy. Mr. Donnini also practices in the areas of federal tax controversy, federal estate planning, Florida probate, and all other state taxes including communication service tax, cigarette & tobacco tax, motor fuel tax, and Native American taxation. Mr. Donnini earned his LL.M. in Taxation at NYU. He is also a co-author of the CCH Expert Treatise Library: State Sales and Use Taxation. Please feel free to visit his firm’s web-site or his blog .

Questions? If you have any questions please do not hesitate to contact him via email at or call 954-642-9390.

Other recent “Sales Tax Nexus” posts by Jerry Donnini:

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