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THE END OF NEXUS
Since the early ‘90s, states haven’t required multi-stateonline retailers to collect sales tax, unless they had asignicant physical presence within that state.
Generallyspeaking, this ‘signicant physical presence’ includedthings like having a warehouse, store, oce, sales orceor other demonstrably direct connections with a state.Years o legal battles between multi-state onlineretailers like Amazon and states like Caliornia hinged onwhether these retailers had enough o a connection totrigger a nexus obligation.Meanwhile, many states enacted Amazon laws torequire more multi-state online retailers to collect salestax or the rst time. These laws expanded denitionso nexus to include online-specic relationships such asaliate and web advertising.Multi-state online retailers, catalog retailers, andbusinesses that make signicant sales over the phonemust also keep track o proposals at the ederal levelthat would allow all states to change nexus. The days otax-ree online shopping may be over, but the debatesrage on.Amazon laws vary rom state to state and typicallycontain one or more o the ollowing elements.
1. Aliate & Related Entity Nexus2. Click-Through Nexus3. Consumer Use NoticationBy incorporating aliate and click-through languagewithin the statutes, Amazon laws efectively remove thetraditional nexus loophole—wherein a company withouta signicant physical presence is not obligated to collectsales tax.
Aliate and Related Entity Nexus
One strategy states use to capture more sales taxrevenue is to dene the kinds o aliate or subsidiaryrelationships that trigger nexus or out-o-statecompanies.Aliate nexus describes a type o relationship betweenan out-o-state seller and its in-state aliate that triggersa nexus obligation. An aliate is usually considered anentity within a state with activities directly benettingan out-o-state seller. Many state laws designate whatkinds o aliate relationships trigger sales tax collectionobligations on remote sellers, so tracking each state is agood idea.
* Out-o-state-retailers must collectsales tax i an aliate “delivers installs, assembles,or perorms maintenance services or the seller’spurchasers within the state.”
* Out-o-state retailers must collect salestax i they are related in any way to any entity locatedin the state. This includes entities that conductbusiness on the out-o-state seller’s behal, as wellas entities that use a similar patent or the sametrademark. Caliornia considers aliate nexus to applyeven i the related business operations are utterly
The bottom line is that statutes are changing at the state andfederal level to require more out-of-state retailers to collectsales tax. And it’s not just the online retailers or mail ordercompanies that will feel the pinch. Any businesses that sellacross state lines need to be paying close attention.