Sales, Use and International Tax Activity Update - March 2010

Slashing Through the “Amazon” to find Nexus – Colorado, Vermont & New Mexico

Eyeing potential revenue gains and heeding bricks-and-mortar businesses' call for sales tax collection equity, lawmakers in at least three states are considering the “Amazon Laws”.
 
Lawmakers in New Mexico, Vermont, and Colorado have submitted bills to require remote sellers such as Amazon.com or Overstock.com to collect sales tax if those sellers have relationships with in-state representatives that refer customers to the retailer.

But these types of laws are also controversial. Amazon.com and New York, which in 2008 was the first state to enact such a law, continue to tangle in the courts. In Rhode Island, which enacted a similar law in 2009, some legislators are advocating repeal.

Colorado:

The Colorado Senate approved an amended "Amazon" law (HB 1193) on February 10; unlike similar laws proposed or enacted in other states, it would eliminate any reference to affiliates. As passed by the Senate, HB 1193, now would eliminate any reference to affiliates. Instead it requires out-of-state retailers to notify their customers that they owe a use tax to the state of Colorado. It requires the notification via first-class mail in a separate envelope. If retailers don't want to do that, they can simply collect the sales tax and remit it to the state.

The bill changed significantly from its original version, which was based on a New York law that taxes out-of-state retailers with nexus in the state. Several other states have enacted or introduced bills similar to New York's, but Colorado legislators were concerned by threats by big retailers like Amazon.com and Overstock.com to cut off their affiliate marketers.

The House Bill can be viewed on the Colorado General Assembly web site.

New Mexico:

The New Mexico House Business and Industry Committee on January 29 tabled legislation (HB 50) that would have implemented an "Amazon" law for out-of-state vendors that have marketing relationships with in-state affiliates. HB 50 is modeled after New York's controversial 2008 law, which supporters say helped to level the playing field between out-of-state online vendors, who typically charge no sales tax, and local bricks-and-mortar shops, which have to charge sales tax.

Being paid to provide a link on an in-state Web site to an out-of-state online vendor's products does not mean the out-of-state vendor , typically Amazon.com or Overstock.com,  has nexus in the state. To avoid nexus issues, Overstock.com has suspended its affiliate marketing programs in New York, North Carolina, and Rhode Island, the three states that have Amazon laws. Amazon has canceled its programs in North Carolina and Rhode Island.

The House Bill can be viewed on the New Mexico Legislature Web site.

Vermont:

Three Vermont lawmakers on January 29 introduced a bill (H 661) modeled after New York's "Amazon" law to require remote sellers with affiliate nexus to collect sales tax. Proponents of Amazon laws argue that this type of arrangement creates nexus for an out-of-state merchant and therefore subjects it to state tax collection. Opponents question the constitutionality of such an argument and say that posting a link does not equate to active soliciting for the out-of-state merchant.

Vermont is the fifth state this year to consider a click-through nexus law. New Mexico, Colorado, Mississippi, and Virginia have bills in play, although New Mexico's bill (HB 50) was tabled on January 29. The Colorado House approved an Amazon law (HB 1193) on February 1.
 
New York in 2008 became the first state to enact such a law. Since then, North Carolina and Rhode Island have followed suit. Online giant Overstock.com, however, has canceled its affiliate program in those three states; Amazon.com has canceled it in North Carolina and Rhode Island. The New York law is also the subject of ongoing litigation.

The House Bill can be viewed The State of Vermont Legislature Web site.

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