I Serving Clients Nationwide I
Sales & Use Tax Tips for November 2008
E-COMMERCE NEXUS STANDARD
U.S. Senate Bill Proposes Physical Presence Nexus Standard for E-Commerce
Currently many states are aggressively pursuing out of state sellers to force them to remit sales and use taxes they may NEVER have even collected from customers as a result of confusion regarding their obligation under the current nexus rules.
Under proposed Federal legislation, without a physical presence in a state an entity could not be required to collect or remit a state tax resulting from that entity’s electronic commerce. This is in direct contrast to a recently enacted New York statutory provision that requires out-of-state Internet retailers with no physical presence in New York to collect and pay New York sales and use taxes on goods purchased by New York residents.
Under S. 3670, introduced in the U.S. Senate on October 1, 2008, by Sen. Jim Bunning, R-KY
A physical presence would include the following:
- Assigning an employee to the state;
- Using the services of an agent to establish or maintain the electronic commerce in the state, if the agent does not perform the same services for anyone else, or;
- Leasing or owning real property or tangible personal property, other than computer software, in the state.
A physical presence would not include the following:
- Entering into an agreement to share revenue generated by an electronic commerce presence owned or maintained by someone physically present in a state;
- Being present in a state for less than 15 days, or;
- Being present in a state to conduct limited or transient business activity.
As reported in our June 2008 Sales Tax Tip, “Recent New York Internet Tax Triggers Constitutional Challenges”, Amazon.com and Overstock.com have both initiated challenges to a recently enacted New York statutory provision that requires out-of-state Internet retailers with no physical presence in New York to collect and pay New York sales and use taxes on goods purchased by New York residents.
The new statutory provision presumes a retailer "solicits" business in New York if any in-state entity is compensated for directly or indirectly referring customers to the retailer, whether by a link on an Internet Web site or otherwise.
S. 3670 would set the nexus standard at the Federal level requiring physical presence thus keeping New York in check while preventing other states from following New York’s example. New York’s new law and S.3670 are keeping Nexus as a key issue in the forefront of sales tax management concerns. In our March 2008 Sales Tax Tip, “SALES TAX NEXUS - Ignore It If You Dare!”, we focused on Nexus issues. S. 3670 has gone to committee. Keeping up with changing nexus laws and reviewing your company’s nexus creating activities can help prevent costly audits and penalty and interest assessments.
Our professionals can help with complicated Nexus issues and minimize potential exposure to make sure your company is in compliance with sales and use tax laws. For more information please see Nexus under the Diagnostic Review section of our website.
Click here for more Sales Tax Tips or visit our website www.oatax.com. For additional insight on common sales tax concerns, please see the Did You Know? section of our website.
Should you have questions or require assistance please Contact us today or call 1-888-466-2829 to speak with an Olivier &
Associates Sales and Use Tax professional for a no-obligation consultation about your Sales & Use Tax issues.
* This tip is intended to provide general information only and is not to be considered as a substitute for professional advice.
