January 08, 2014

Affiliate Nexus Tax Legislation Update for 2014

NOTE: Updated affiliate nexus guide by state is available here

We at Schaaf-PartnerCentric wanted to start the new year with an update on affiliate nexus tax legislation so that all affiliate marketers have a clear picture of the current state of these laws state by state. We worked in conjunction with our counsel, Gary Kibel of Davis & Gilbert LLP, to prepare this updated list of nexus legislation and activity. Please share this with your friends and colleagues in affiliate marketing.

It’s important for everyone in the performance marketing industry to stay informed about affiliate nexus tax legislation, which to date has adversely affected the livelihoods of more than 80,000 online affiliate marketers in the United States. Small businesses have been compelled to relocate to unaffected states or down-size as a result of these laws.

Recent Developments in Affiliate Nexus Tax Legislation

This past October, the Illinois State Supreme Court upheld the Performance Marketing Association’s lawsuitagainst the Illinois Affiliate Nexus law, thereby invalidating the law.

A a proposed federal legislative solution to the nexus issue called The Marketplace Fairness Act of 2013passed in the Senate but has not moved through the House.

Earlier this month, the United States Supreme Court declined to hear an appeal from Amazon and Overstock on New York’s 2008 nexus law.

Here’s a great recap of the overall nexus situation from Forbes.com.

A State-By-State Look at the Issue with Workarounds

Nexus legislation may influence whether or not a given retailer works with an affiliate in a given state. What follows is the current legislation state by state and, where available, accepted workarounds. Where the workaround involves an annual certification affidavit, it is generally held to be a best practice to renew said affidavit immediately following the close of the applicable year. Now’s a good time.

Please note, Schaaf-PartnerCentric is not a law firm or an accounting firm.  These materials are for informational purposes only. You should consult with your professional advisors before making any decisions that may impact your tax obligations.

States with Active Affiliate Nexus Tax Legislation

ARKANSAS
Statute
http://www.arkleg.state.ar.us/assembly/2011/2011R/Pages/BillInformation.aspx?measureno=sb738

Revenue Threshold
May require out-of-state retailers with Arkansas affiliates who refer at least $10,000 in sales from Arkansas purchasers to collect and remit sales tax.

Workaround
If seller can demonstrate that affiliates’ activities in state are not significantly associated with seller’s ability to establish or maintain the market for seller’s sales in the state, then presumption rebutted that the seller is engaging in the business of selling tangible personal property or taxable services within the state.

CALIFORNIA
Statute

http://www.boe.ca.gov/lawguides/business/current/btlg/vol1/sutr/1684.html

Guidance
http://www.boe.ca.gov/news/pdf/l324.pdf
http://www.boe.ca.gov/lawguides/business/current/btlg/vol1/sutr/1684.html
http://www.boe.ca.gov/sutax/abx1-28faq.htm

Revenue Threshold
Out-of-state sellers with California affiliates referring at least $10,000 in annual sales to purchasers in California will be required to collect and remit sales tax to the state.

Workaround
Nexus not created when:

  • California publisher posts click-through ads or links to retailers’ sites in return for commissions earned on sales resulting from those ads, as long as the publisher does not explicitly solicit California purchasers; and
  • California publisher advertises its own sites, on other sites or via mail or email, as long as it refers people only to its own sites.

CONNECTICUT
Statute
http://www.cga.ct.gov/2013/ACT/PA/2013PA-00123-R00HB-06652-PA.htm

Revenue Threshold
May require out-of-state retailers who have Connecticut affiliates that refer at least $2,000 in sales from Connecticut purchasers to collect and remit sales tax effective as of July 1, 2011.

GEORGIA
Statute
http://www.legis.ga.gov/Legislation/en-US/display/20112012/HB/386

Revenue Threshold
Effective December 31, 2012, may require out-of-state retailers who have Georgia affiliates that refer at least $50,000 in sales from Georgia purchasers to collect and remit sales tax.

KANSAS
Statute

http://www.kslegislature.org/li/b2013_14/measures/documents/sb83_enrolled.pdf

Guidance
http://www.kslegislature.org/li/b2013_14/measures/documents/summary_sb_83_2013.pdf

Revenue Threshold
Effective July 1, 2013, out-of-state sellers with Kansas affiliates referring at least $10,000 in annual sales to purchasers in Kansas will be required to collect and remit sales tax to the state.

MAINE
Statute

http://www.mainelegislature.org/legis/bills/bills_126th/chapters/PUBLIC200.asp

Revenue Threshold
Effective July 1, 2013, out-of-state sellers with Maine affiliates referring exceeding $10,000 in annual sales to purchasers in Maine, will be required to collect and remit sales tax to the state

MINNESOTA
Statute

https://www.revisor.mn.gov/bills/text.php?number=HF677&version=4&session=ls88&session_year=2013&session_number=0#pl.160.21

Revenue Threshold
Effective July 1, 2013, out-of-state sellers with Minnesota affiliates referring at least $10,000 in annual sales to purchasers in Minnesota will be required to collect and remit sales tax to the state.

MISSOURI
Statute

http://www.senate.mo.gov/13info/pdf-bill/tat/SB23.pdf

Guidance
Letter ruling on advertising – http://dor.mo.gov/rulings/LR4702.htm

Revenue Threshold
Out-of-state sellers with Missouri affiliates referring at least $10,000 in annual sales to purchasers in Missouri will be required to collect and remit sales tax to the state.

Workaround
Under 12 CSR 10-114.100(3)(B)- “A vendor does not have sufficient nexus if the only contact with the state is delivery of goods by common carrier or mail, advertising in the state through media, or occasionally attending trade shows at which no orders for goods are taken and no sales are made.” Emphasis added.

NEW YORK
Statute

1101(b)(8)(vi)
http://public.leginfo.state.ny.us/LAWSSEAF.cgi?QUERYTYPE=LAWS+&QUERYDATA=$$TAX1101$$@TXTAX01101+&LIST=SEA1+&BROWSER=BROWSER+&TOKEN=27875329+&TARGET=VIEW

Guidance
http://nystax.gov/pdf/memos/sales/m08_3s.pdf

http://www.tax.ny.gov/pdf/memos/sales/m08_3_1s.pdf

Revenue Threshold
Out-of-state sellers with New York affiliates referring at least $10,000 in annual sales to purchasers in New York will be required to collect and remit sales tax to the state.

Workaround
Placing an advertisement does not include the placement of a link on a website that links to the website of a seller, where the consideration for placing the link on the website is based on the volume of completed sales generated by the link.

Contracts to place advertising on organization’s websites do not create a presumption that the contractor is a vendor making taxable sales in New York State if the affiliates do not engage in solicitation on behalf of the seller.

If the only activity of the affiliate is to place links to the seller’s website and the affiliates do not engage in solicitation activity targeted at potential New York State customers on behalf of the seller, then the seller is not considered a vendor for the purposes of the affiliate-nexus tax.  The contract between the seller and the representative must provide that the representative is prohibited from soliciting New York State customers and each representative must submit a signed affidavit to the seller stating that the representative has not engaged in prohibited solicitation activities.

NORTH CAROLINA
Statute
http://www.ncga.state.nc.us/sessions/2009/budget/2009/S202-CCSMAxf-3.pdf

Guidance
http://www.dornc.com/downloads/e505_8-09.pdf

Revenue Threshold
Out-of-state sellers with North Carolina affiliates referring at least $10,000 in annual sales to purchasers in North Carolina will be required to collect and remit sales tax to the state.

PENNSYLVANIA
Statute

http://www.revenue.state.pa.us/portal/server.pt/document/1210543/st_bulletin_2011-01_pdf

Revenue Threshold
The Pennsylvania statute does not have a revenue threshold.  Out-of-state sellers with Pennsylvania affiliates referring sales to purchasers in Pennsylvania will be required to collect and remit sales tax to the state.

RHODE ISLAND
Statute

http://www.rilin.state.ri.us/BillText/BillText09/HouseText09/Article-016-SUB-A-as-amended.pdf

Guidance
http://www.tax.state.ri.us/notice/Retailer_definition_NoticeC.pdf

Revenue Threshold
Out-of-state sellers with Rhode Island affiliates referring at least $5,000 in annual sales to purchasers in Rhode Island will be required to collect and remit sales tax to the state.

VERMONT
Statute
http://www.leg.state.vt.us/docs/2012/Acts/ACT045.pdf

Revenue Threshold
Note: Vermont’s tax is not effective until at least 15 or more states adopt requirements that are substantially similar to Vermont’s requirements. Out-of-state sellers with Vermont affiliates referring at least $10,000 in annual sales to purchasers in Vermont will be required to collect and remit sales tax to the state.

States with Affiliate Nexus Tax Legislation Pending 
Alabama
Colorado
Florida
Hawaii
Michigan
Oklahoma
South Dakota
Tennessee
West Virginia

We also encourage you to join and support the Performance Marketing Association, which serves as an advocate for the industry and for affiliate marketers everywhere. The PMA is a great source of information and updates about affiliate nexus tax legislation. Learn more at ThePMA.org.

We understand that Nexus Tax Legislation is a complicated and constantly changing subject. If you are interested in discussing how these changes will effect your program, please request a consultation with one of our team members.






Latest posts by Tom Rathbone (see all)