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What is Click-Through Nexus for Sales Tax?

Also known as “The Amazon Law” (after internet trendsetter Amazon.com), click-through nexus laws clarify that the solicitation of business by placing a link on someone’s website in another state that connects a potential customer to your website may create a sales tax filing obligation for you in that “foreign” state. In order to eliminate forcing this requirement on smaller business, most states include a $10,000 threshold for sales in the preceding year resulting from these click-throughs. Be careful, though, if you are a multi-state business as the threshold for the following states are less: Rhode Island, Connecticut and Pennsylvania ($0). About half of all states have now either passed click-through laws or follow them as policy.

You might ask what happened to the requirement of physical presence in a state to create nexus as established in the Supreme Court decision in the Quill case. In response, some states might argue that a link already qualifies as physical presence. For example, New York State law always provided that nexus includes physical presence of employees, independent contractors, agents or other representatives soliciting business in New York State. Placing a link on a website that connects to your website is the modern equivalent of this example – an agent or representative soliciting business for you. New York’s law, as well as the law in many other states, includes a presumption that the agent or representative is soliciting for you. This is a rebuttable presumption, however, which means that if the only activity in New York is the link and the agent does not engage in any solicitation on behalf of the out of state seller, the nexus rule can be challenged. Most states with Amazon Laws have this rebuttable presumption. However, Connecticut’s law is irrefutable.

Additionally, the law in Illinois was challenged in the Illinois Supreme Court and it was found that the click-through law was not permitted as it was preempted by the Internet Tax Freedom Act and it discriminated against the use of internet. In response, Illinois amended their law to include both tangible and electronic means of referring sales. The click-through law is once again active in Illinois.

Do the click-through laws pertain to Corporation taxes? While you never know what a particular state will propose, the click-through nexus laws are specific to sales tax. Many states have also created new corporation nexus laws based on the amount of sales in that state with no physical presence required. States have become aggressive in writing new laws to attach new taxpayers to their state. If you have any questions regarding nexus or filing requirements in any state, please call 516-938-5219

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