California Takes Aim at Remote Retailers!
The California Assembly introduced two bills this week aimed at remote retailers. Amazon.com Nexus - AB153
The bill changes the definition of a retailer engaged in business in this state to include:any retailer entering into agreements under which a person in this state, for a commission or other consideration, directly or indirectly refers potential purchasers, whether by an Internet-based link or an Internet Web site, or otherwise, to the retailer, provided the total cumulative sales price from all sales by the retailer to purchasers in this state that are referred pursuant to these agreements is in excess of $10,000 within the preceding 12 months, except as specified.
The bill would further provide that a retailer entering specified agreements to purchase advertising is not a retailer engaged in business in this state.Nexus Presumption and Notification Requirements - AB155
The other bill (AB155) would impose nexus presumption standards for members of commonly controlled groups, and impose notification requirements similar to those currently in effect and adopted last year by Colorado.
The bill would revise the definition of "retailer engaged in business in this state" to mean any retailer that has a substantial nexus with this state for purposes of the commerce clause of the United States Constitution and any retailer upon which federal law permits this state to impose a use tax collection duty. The bill would also include specified retailers as retailers engaged in business in this state and would eliminate an exclusion.
The bill would also require each retailer that is not required to collect use tax to provide notification on its retail Internet Web site and any catalog that tax is imposed on the storage, use, or other consumption in this state of the tangible personal property purchased from the retailer and is required to be paid by the purchaser, as provided.
The bill would require every person not required to register with the board that sells tangible personal property the storage, use, or other consumption of which is subject to use tax to file a report with the board regarding those sales, as specified. The bill would also require those persons to annually send a notice to each purchaser showing the total amount of purchases made by that purchaser in the prior calendar year and informing the purchaser of the obligation to file the appropriate use tax returns, as prescribed. The bill would impose specified monetary penalties for failure to comply, while excluding from these requirements persons whose receipts from those sales do not exceed a specified amount.
Its only January 27th, and we have had four states introduce Amazon.com legislation (IL, MS, NM and CA). The "use tax" gap is a problem in every state, and Amazon.com nexus is an easy target as a solution. Amazon.com nexus is just a way of collecting use tax that is already due to the state. Unfortunately, there are negative side effects that occur for individuals and businesses that operate in affiliate programs.
With states budgets in crisis mode, states will be looking at cutting expenses, increasing taxes and increasing incentives for businesses to expand in their state and/or create jobs. If budget pressures continue to increase, new governors and state legislators may have no choice but to overlook protests from individuals and businesses that operate in affiliate programs, and adopt Amazon.com nexus standards.
Keep watching to see what's next.
Brian Strahle is the owner of LEVERAGE SALT, LLC where he provides state and local tax technical services to accounting firms, law firms and tax research organizations across the United States. He also writes a weekly column in Tax Analysts State Tax Notes entitled, "The SALT Effect." For more info, visit his website: www.leveragestateandlocaltax.com
You can reach Brian at firstname.lastname@example.org.
Because state and local taxes are deceptively simple and endlessly complicated.