State legislatures continue to propose changes to sales and use tax laws addressing out-of-state and online sales transactions whereby affiliate agreements with in-state businesses would treat unregistered out-of-state businesses as doing business in a state. If passed, the legislation generally requires the out-of-state businesses to register for sales and use tax, as well as to collect and remit the tax on its sales to in-state customers.
Louisiana, Nebraska, South Dakota, and Utah, discussed below, are some examples of recent proposed legislation addressing remote seller/online sales activities.
Louisiana Proposes Affiliate Nexus Provisions
Louisiana House Bill No. 30 contains proposed amendments to the definition of “dealer” under the sales and use tax laws. Persons that have entered into an agreement with a Louisiana resident or business that refers potential customers for a fee or other consideration will be treated as a dealer. Referral by the Louisiana resident or business may happen via website link, in-person presentation, telemarketing, or similar manner.
The term “affiliate agent” is also added as a Louisiana resident or business that engages in activities that benefit another to the extent of developing or maintaining commercial activity in Louisiana. Again, a person will have entered into an agreement where a fee or other consideration is provided for the affiliated agent’s activities.
Nebraska Proposal Would Expand Nexus Provisions to Capture Remote and Online Sales
On February 20, 2016, Nebraska’s state legislature introduced LB 1087, which expands the definition for “engaged in business” in Nebraska to include online referral, listing of products, or other facilitation of sales for entities that have nexus with the state.
According to LB 1087, a seller would be presumed engaged in business in Nebraska if the total cumulative sales price of products sold to purchasers exceeded $10,000 in the immediately preceding calendar year, and the seller either has a physical presence in or is registered to collect and remit sales tax in a state that is a member of the streamlined sales and use tax agreement. Such a seller would be required to collect and remit sales and use tax unless it could prove that it did not have nexus with Nebraska.
The Nebraska Legislature has not yet moved past the introduction stage of the bill, and no other instances or editions of the bill have been introduced.
South Dakota Sales and Use Tax: Remote Sellers Collection Requirement Enacted (March 31, 2016)
South Dakota has enacted sales and use tax collection requirements for remote sellers who meet certain sales thresholds. A retailer is liable for the collection of sales and use tax in South Dakota, even if the seller does not have a physical presence in state, if the seller meets either of the following criteria: 1) the seller’s gross revenue from such transactions exceeds $100,000 in the previous or current calendar year, or 2) the seller made more than 200 separate transactions by selling tangible personal property, products electronically transferred, or services for delivery into South Dakota in the previous or current calendar year. The bill also provides for an expedited declaratory judgment and review process to address any federal constitutional issues. Senate Bill 106 was passed by the House March 1, 2016.
Utah Proposes Nexus Provisions for Remote Seller Affiliates
Utah House Bill 235, also known as the “Remote Transactions Parity Act,” was introduced in the Utah House of Representatives on January 28, 2016 designed to capture affiliate advertising, referral, or other similar facilitation of online sales on behalf of remote sellers.
The Utah Legislature indicates that the bill received an “amendment recommendation” and a “favorable recommendation” from the House Revenue and Taxation Committee on February 24, 2016. On February 25th, the Legislature submitted an amendment to the legislation, which limits the presumption of nexus to affiliates of remote sellers with sales greater than $50,000 in the preceding 12-month period.
TECHNICAL INFORMATION CONTACT:
Jeremiah T. Lynch