We have been updating readers on developments regarding the court challenge brought by the Direct Marketing Association (“DMA”) to a 2010 Colorado law that purported to require Internet retailers and other remote sellers that do not collect Colorado sales tax to: (1) give certain notices to their Colorado customers regarding the purchaser’s obligation to self-report Colorado use tax; and (2) file reports with the Colorado Department of Revenue detailing the private purchasing information of their Colorado customers. The DMA won a preliminary injunction in January 2011 in federal District Court suspending the law on the grounds that it violated the Commerce Clause. The Court later made the injunction permanent when it awarded the DMA summary judgment in March 2012. The State appealed.
In August 2013, the Court of Appeals for the Tenth Circuit ruled on its own initiative that the Tax Injunction Act (“TIA”) barred federal court jurisdiction over the DMA’s claims. The Court of Appeals did not reach the merits of the DMA’s Commerce Clause claims, but rather ordered that the claims be dismissed on procedural grounds. The Court held that the DMA was required under the TIA to bring its claims in Colorado state court. The DMA requested rehearing on the jurisdictional issue, but the Tenth Circuit declined in early October to rehear the matter. The Court of Appeals then issued a mandate to the District Court on October 9, directing the lower court to dissolve the injunction and dismiss the claims. (The District Court has not yet implemented the mandate, so for now the federal injunction remains in place.)
On November 5, 2013, the DMA re-filed its challenge to the Colorado notice and reporting law in state District Court in Denver. At the same time, the DMA moved for a preliminary injunction, in order to continue the suspension of the law after the federal court injunction is lifted. Briefing on the motion for a preliminary injunction is expected to conclude in December, with a hearing on the motion likely to be scheduled for early January 2014. The DMA will request that the state court rule on the injunction request prior to January 31, the deadline under the law for retailers to send certain annual notices to customers who purchased at least $500 in goods from the retailers in the prior year.
Brann & Isaacson partners George Isaacson and Matthew Schaefer are co-counsel to the DMA in connection with the appeal.
We will keep you apprised of further developments in the state court proceeding.
Showing posts with label Colorado. Show all posts
Showing posts with label Colorado. Show all posts
Friday, November 22, 2013
Thursday, August 29, 2013
Federal Appeals Court Rules Lower Court Lacked Jurisdiction to Enjoin Colorado Notice and Reporting Law; Direct Marketing Association Will Seek Rehearing En Banc
Many of our readers have been following closely the litigation challenging the Colorado law passed in 2010, which required remote sellers to inform consumers of their obligation to self-report sales and use tax and also required direct marketers to turn over to the Colorado Department of Revenue the names of their Colorado customers along with sales transaction information. In 2012, the United States District Court in Denver declared the Colorado law unconstitutional, as a violation of the Commerce Clause. The Colorado Department of Revenue appealed the District Court decision to the Tenth Circuit Court of Appeals.
On Tuesday, August 20, 2013, the Tenth Circuit issued its decision in Direct Marketing Association v. Brohl. The three judge panel hearing the case did not reach, or address in any way, the constitutional issues in the case. Instead, the Court ruled solely on the question of whether the District Court had jurisdiction to hear the case.
Although the jurisdiction of the federal courts was not contested by the parties, the appellate court concluded that the United States District Court in Denver did not have jurisdiction because of the so-called Tax Injunction Act (28 U.S.C. sec. 1341) (“TIA”). This jurisdictional statute prevents federal courts from entering judgments that restrain the collection of state taxes, and the Tenth Circuit ruled that it applied in this case. The Court stated that the challenge to the constitutionality of the Colorado law must be filed in state court rather than federal court. Therefore, the Court of Appeals remanded the case back to the District Court and directed it to dismiss the DMA’s Commerce Clause claims and to dissolve the permanent injunction against the Department of Revenue’s enforcement of the law.
The effect of the Court of Appeals’ ruling that the case should be dismissed does not take immediate effect, despite some media reports that suggest the contrary. Rather, as in any appeal, the ruling of the Court of Appeals is not implemented until it issues a “mandate” to the District Court. The Tenth Circuit Court of Appeals has not yet issued a mandate in the DMA’s case, and will not do so until after certain deadlines have passed.
In addition, the DMA has decided that it will petition for rehearing “en banc” by the full group of active judges serving on the Tenth Circuit Court of Appeals. The filing of the petition for rehearing en banc will further extend the period during which the Court of Appeals will withhold issuance of the mandate to the District Court. If the petition is granted by the Court, the mandate would not issue until after the rehearing of the case by the full court.
For now, therefore, the injunction entered by the District Court remains in place, and remote sellers are not yet required to comply with the requirements of the Colorado notice and reporting law. We will keep readers apprised of developments in the case in connection with the DMA’s petition for rehearing.
Brann & Isaacson partners George Isaacson and Matthew Schaefer represent the DMA in the case.
On Tuesday, August 20, 2013, the Tenth Circuit issued its decision in Direct Marketing Association v. Brohl. The three judge panel hearing the case did not reach, or address in any way, the constitutional issues in the case. Instead, the Court ruled solely on the question of whether the District Court had jurisdiction to hear the case.
Although the jurisdiction of the federal courts was not contested by the parties, the appellate court concluded that the United States District Court in Denver did not have jurisdiction because of the so-called Tax Injunction Act (28 U.S.C. sec. 1341) (“TIA”). This jurisdictional statute prevents federal courts from entering judgments that restrain the collection of state taxes, and the Tenth Circuit ruled that it applied in this case. The Court stated that the challenge to the constitutionality of the Colorado law must be filed in state court rather than federal court. Therefore, the Court of Appeals remanded the case back to the District Court and directed it to dismiss the DMA’s Commerce Clause claims and to dissolve the permanent injunction against the Department of Revenue’s enforcement of the law.
The effect of the Court of Appeals’ ruling that the case should be dismissed does not take immediate effect, despite some media reports that suggest the contrary. Rather, as in any appeal, the ruling of the Court of Appeals is not implemented until it issues a “mandate” to the District Court. The Tenth Circuit Court of Appeals has not yet issued a mandate in the DMA’s case, and will not do so until after certain deadlines have passed.
In addition, the DMA has decided that it will petition for rehearing “en banc” by the full group of active judges serving on the Tenth Circuit Court of Appeals. The filing of the petition for rehearing en banc will further extend the period during which the Court of Appeals will withhold issuance of the mandate to the District Court. If the petition is granted by the Court, the mandate would not issue until after the rehearing of the case by the full court.
For now, therefore, the injunction entered by the District Court remains in place, and remote sellers are not yet required to comply with the requirements of the Colorado notice and reporting law. We will keep readers apprised of developments in the case in connection with the DMA’s petition for rehearing.
Brann & Isaacson partners George Isaacson and Matthew Schaefer represent the DMA in the case.
Tuesday, April 9, 2013
Despite Unconstitutionality, Kentucky Enacts Consumer Use Tax Notification Requirement for Out-Of-State Retailers
On April 4, 2013, Kentucky Governor Steve Beshear signed into law HB 440. The bill includes an amendment to Kentucky’s tax code which will impose a new requirement on every retailer that makes sales into Kentucky from outside the state and that is not required to collect Kentucky use tax. The law requires that these retailers provide a notice to their customers that Kentucky purchasers are required to report and pay use tax directly to the Kentucky Department of Revenue. A similar provision enacted in Colorado in 2010 as part of a broader notification and reporting bill was declared unconstitutional by a federal judge in Direct Marketing Association v. Huber, a case now on Appeal before the 10th Circuit Court of Appeals. Brann & Isaacson is counsel to the DMA in the Colorado litigation.
While three other states—Oklahoma, South Dakota, and Vermont—have similar consumer use tax notification requirements on the books, Kentucky’s new law is more aggressive:
First, on its face, Kentucky’s law requires retailers to use “the exact required use tax notification language” set forth in the statute concerning compliance with Kentucky law, and does not include a substantial compliance provision likes other states. According to the statute, even if a seller already has a notice provision for other states, that notice provision is only adequate for purposes of Kentucky law “if the consolidated notification meets the requirements of this section.” In other words, only the “exact” language of the Kentucky law, and not something substantially similar that a retailer adopts in response to another state’s notification law, appears to be allowed.
Second, the Kentucky statute expressly applies to “online auction Web sites.” It is not clear whether the requirement is meant to apply to the auction site itself, or whether it means that retailers selling through an auction site must arrange for display of the notice with respect to their own sales. But note that there is a small seller exemption that exempts any retailer with sales of less than $100,000 to Kentucky residents from having to comply with the statute. This may lessen the impact of the Kentucky law on Internet auction sites.
Third, while South Dakota and Vermont each provide that there can be no civil or criminal penalties for a retailer’s failure to comply with the use tax notification provision, Kentucky has no such non-enforcement clause. The Oklahoma statute is likewise silent on enforcement and, in practice, the Oklahoma notice law has not been enforced by the state’s Tax Commission. It remains to be seen whether the Kentucky Department of Revenue will bring enforcement actions, but nothing in the new law appears to prevent it.
For more details on the new Kentucky consumer use tax notification statute and how it might affect an out-of-state retailer’s website check-out screens and catalog order forms, ecommerce vendors and other remote sellers should consult their tax advisors.
While three other states—Oklahoma, South Dakota, and Vermont—have similar consumer use tax notification requirements on the books, Kentucky’s new law is more aggressive:
First, on its face, Kentucky’s law requires retailers to use “the exact required use tax notification language” set forth in the statute concerning compliance with Kentucky law, and does not include a substantial compliance provision likes other states. According to the statute, even if a seller already has a notice provision for other states, that notice provision is only adequate for purposes of Kentucky law “if the consolidated notification meets the requirements of this section.” In other words, only the “exact” language of the Kentucky law, and not something substantially similar that a retailer adopts in response to another state’s notification law, appears to be allowed.
Second, the Kentucky statute expressly applies to “online auction Web sites.” It is not clear whether the requirement is meant to apply to the auction site itself, or whether it means that retailers selling through an auction site must arrange for display of the notice with respect to their own sales. But note that there is a small seller exemption that exempts any retailer with sales of less than $100,000 to Kentucky residents from having to comply with the statute. This may lessen the impact of the Kentucky law on Internet auction sites.
Third, while South Dakota and Vermont each provide that there can be no civil or criminal penalties for a retailer’s failure to comply with the use tax notification provision, Kentucky has no such non-enforcement clause. The Oklahoma statute is likewise silent on enforcement and, in practice, the Oklahoma notice law has not been enforced by the state’s Tax Commission. It remains to be seen whether the Kentucky Department of Revenue will bring enforcement actions, but nothing in the new law appears to prevent it.
For more details on the new Kentucky consumer use tax notification statute and how it might affect an out-of-state retailer’s website check-out screens and catalog order forms, ecommerce vendors and other remote sellers should consult their tax advisors.
Wednesday, October 26, 2011
Nexus of Subsidiary Not Automatically Attributable to Parent Company
Recently, a number of states have adopted statutes providing that an out-of state retailer is presumed to have nexus in the state by virtue of ownership of a subsidiary that does business in the state. See California (ABX 1, but note its implementation was delayed by AB 155); Colorado (Colo. Rev. Stat. § 39-26-102(3)(b)(II)); and Arkansas (Ark. Code Ann. 26-52-117(b)). While each of these state statutes provides that mere ownership creates only a presumption of nexus, which a retailer can rebut, some commentators have interpreted these laws as attributing the nexus of in-state affiliates to related out-of-state companies.
But an out-of-state retailer’s mere ownership of a company without the company acting as an agent or representative of the retailer will not create nexus for the retailer under the constitutional standard. Quill and a number of cases decided both before and after Quill stand for the proposition that mere ownership of another company that has an in-state presence does not create nexus for the parent, absent the in-state subsidiary engaging in activities on behalf of the parent to create a market in the state for the parent. We wrote an article back in 1996 that discusses the case law. See Defending Against Affiliate Nexus in Sales and Use Tax Collection Liability Cases, State Tax Notes (March/April 1996). In other words, the subsidiary must be acting as an agent or representative of the parent company in the state for the nexus of the subsidiary to be attributed to the parent.
The constitutional standard has not changed since we wrote the article in 1996. In fact, recent position statements issued by the Tennessee Attorney General and the staff of the California Board of Equalization agree that ownership of an in-state company alone does not create nexus for the out-of-state company. The Tennessee statute (Tenn. Code Ann. § 67-6-102(25)(G)), which has been on the books for a number of years, provides that an out-of-state retailer that “maintains, or has within this state, directly or by a subsidiary, sales room or house, warehouse, or other place of business distributing facility or warehouse,” has nexus with Tennessee. Cal. Rev. & Tax Code § 6203(c)(1) similarly provides that “[a]ny retailer maintaining, occupying, or using, permanently or temporarily, directly or indirectly, or through a subsidiary, or agent, by whatever name called, an office, place of distribution, sales or sample room or place, warehouse . . . or other place of business” is required to collect and remit the California use tax.
In Opinion No. 11-71 (dated October 3, 2011), the Tennessee Attorney General opined in a response to a request from the Legislature to interpret the statute that the mere ownership by Amazon.com of a subsidiary that operated a distribution center in Tennessee would not establish nexus for Amazon.com in connection with its sales of products. Something more needs to be established. According to the Attorney General, “nexus is established only if the subsidiary’s in-state activities are significantly associated with the retailer’s ability to establish and maintain a market in Tennessee for sales.” The Attorney General’s opinion cites Tyler Pipe Industries, Inc. v. Washington Department of Revenue, 483 U.S. 232 (1987). In Tyler Pipe, the out-of-state company contracted with sales representatives that conducted in-state solicitation activities on its behalf. These activities, according to the Supreme Court, created nexus because they helped “to establish and maintain a market” in the state. The Tennessee Attorney General’s opinion notes that “the current Supreme Court jurisprudence in this area does not firmly establish whether a subsidiary’s ownership or maintenance of an in-state distributing center or warehouse would be sufficient to create nexus where the subsidiary is not engaged in actual solicitation activities.” See Attorney General’s Opinion No. 11-71 at p. 2.
Similarly, in an October 14, 2011 discussion paper regarding proposed revisions to Sales and Use Tax Regulation 1684, Board of Equalization staff commented on the state of common ownership nexus. The staff agrees with the Tennessee Attorney General that mere ownership does not establish nexus, citing Current, Inc. v. State Board of Equalization, 24 Cal.App.4th 382 (1994) (a case that we commented on in our 1996 article), and the more recent case of Borders Online, LLC v. State Board of Equalization, 129 Cal. App.4th 1179 (2005), in which the Court of Appeals held that the activities conducted on behalf of the retailer must “enhance the retailer’s sales to California customers and significantly contribute to the retailer’s ability to establish and maintain a market in California.” See Discussion paper at 5. (We disagree with staff’s conclusion that the standard of performing “services in this state in connection with tangible personal property to be sold by the retailer” satisfies Quill.)
In short, as we wrote long ago, the ownership of a subsidiary alone will not create nexus. The in-state subsidiary must be engaged in activities on behalf of the out-of-state company (parent) in order to create the necessary nexus for the out-of-state company. The law has not changed since we wrote the article. The recent wave of legislation does not alter the test in Quill.
But an out-of-state retailer’s mere ownership of a company without the company acting as an agent or representative of the retailer will not create nexus for the retailer under the constitutional standard. Quill and a number of cases decided both before and after Quill stand for the proposition that mere ownership of another company that has an in-state presence does not create nexus for the parent, absent the in-state subsidiary engaging in activities on behalf of the parent to create a market in the state for the parent. We wrote an article back in 1996 that discusses the case law. See Defending Against Affiliate Nexus in Sales and Use Tax Collection Liability Cases, State Tax Notes (March/April 1996). In other words, the subsidiary must be acting as an agent or representative of the parent company in the state for the nexus of the subsidiary to be attributed to the parent.
The constitutional standard has not changed since we wrote the article in 1996. In fact, recent position statements issued by the Tennessee Attorney General and the staff of the California Board of Equalization agree that ownership of an in-state company alone does not create nexus for the out-of-state company. The Tennessee statute (Tenn. Code Ann. § 67-6-102(25)(G)), which has been on the books for a number of years, provides that an out-of-state retailer that “maintains, or has within this state, directly or by a subsidiary, sales room or house, warehouse, or other place of business distributing facility or warehouse,” has nexus with Tennessee. Cal. Rev. & Tax Code § 6203(c)(1) similarly provides that “[a]ny retailer maintaining, occupying, or using, permanently or temporarily, directly or indirectly, or through a subsidiary, or agent, by whatever name called, an office, place of distribution, sales or sample room or place, warehouse . . . or other place of business” is required to collect and remit the California use tax.
In Opinion No. 11-71 (dated October 3, 2011), the Tennessee Attorney General opined in a response to a request from the Legislature to interpret the statute that the mere ownership by Amazon.com of a subsidiary that operated a distribution center in Tennessee would not establish nexus for Amazon.com in connection with its sales of products. Something more needs to be established. According to the Attorney General, “nexus is established only if the subsidiary’s in-state activities are significantly associated with the retailer’s ability to establish and maintain a market in Tennessee for sales.” The Attorney General’s opinion cites Tyler Pipe Industries, Inc. v. Washington Department of Revenue, 483 U.S. 232 (1987). In Tyler Pipe, the out-of-state company contracted with sales representatives that conducted in-state solicitation activities on its behalf. These activities, according to the Supreme Court, created nexus because they helped “to establish and maintain a market” in the state. The Tennessee Attorney General’s opinion notes that “the current Supreme Court jurisprudence in this area does not firmly establish whether a subsidiary’s ownership or maintenance of an in-state distributing center or warehouse would be sufficient to create nexus where the subsidiary is not engaged in actual solicitation activities.” See Attorney General’s Opinion No. 11-71 at p. 2.
Similarly, in an October 14, 2011 discussion paper regarding proposed revisions to Sales and Use Tax Regulation 1684, Board of Equalization staff commented on the state of common ownership nexus. The staff agrees with the Tennessee Attorney General that mere ownership does not establish nexus, citing Current, Inc. v. State Board of Equalization, 24 Cal.App.4th 382 (1994) (a case that we commented on in our 1996 article), and the more recent case of Borders Online, LLC v. State Board of Equalization, 129 Cal. App.4th 1179 (2005), in which the Court of Appeals held that the activities conducted on behalf of the retailer must “enhance the retailer’s sales to California customers and significantly contribute to the retailer’s ability to establish and maintain a market in California.” See Discussion paper at 5. (We disagree with staff’s conclusion that the standard of performing “services in this state in connection with tangible personal property to be sold by the retailer” satisfies Quill.)
In short, as we wrote long ago, the ownership of a subsidiary alone will not create nexus. The in-state subsidiary must be engaged in activities on behalf of the out-of-state company (parent) in order to create the necessary nexus for the out-of-state company. The law has not changed since we wrote the article. The recent wave of legislation does not alter the test in Quill.
Wednesday, May 11, 2011
Colorado Federal Court to Consider Possible Final Judgment on DMA’s Constitutional Challenge to the Colorado Notice and Reporting Law in DMA v. Huber
This post is to update our readers regarding the status of the Direct Marketing Association’s challenge to the constitutionality of Colorado HB 10-1193, the law enacted in 2010 that imposes discriminatory notice and reporting obligations on out-of-state retailers that do not collect Colorado sales tax. Brann & Isaacson attorneys George Isaacson and Matt Schaefer are counsel to the DMA in the case
In January 2011, the federal District Court for the District of Colorado granted the DMA’ s motion for a preliminary injunction and suspended enforcement of the law on the grounds that it likely violates the Commerce Clause of the United States Constitution on two separate, and independent grounds. In February, the Defendant appealed to the Tenth Circuit, but subsequently withdrew the appeal after the District Court approved a proposal by the parties to file cross-motions for summary judgment seeking a final ruling by the Court on the Commerce Clause issues, while staying further proceedings on all other claims in the case. The District Court agreed that, if it awards summary judgment to either party, it will certify the matter for immediate appeal to the Tenth Circuit Court of Appeals, so that the Commerce Clause issues may be finally resolved.
Each party filed a motion for summary judgment with the District Court on May 6. Responses are due May 27, and replies are due June 10. A ruling by the Court on the motions, and likely an appeal to the Tenth Circuit, will follow. We will continue to update readers with further developments.
In January 2011, the federal District Court for the District of Colorado granted the DMA’ s motion for a preliminary injunction and suspended enforcement of the law on the grounds that it likely violates the Commerce Clause of the United States Constitution on two separate, and independent grounds. In February, the Defendant appealed to the Tenth Circuit, but subsequently withdrew the appeal after the District Court approved a proposal by the parties to file cross-motions for summary judgment seeking a final ruling by the Court on the Commerce Clause issues, while staying further proceedings on all other claims in the case. The District Court agreed that, if it awards summary judgment to either party, it will certify the matter for immediate appeal to the Tenth Circuit Court of Appeals, so that the Commerce Clause issues may be finally resolved.
Each party filed a motion for summary judgment with the District Court on May 6. Responses are due May 27, and replies are due June 10. A ruling by the Court on the motions, and likely an appeal to the Tenth Circuit, will follow. We will continue to update readers with further developments.
Thursday, April 28, 2011
States on the Warpath
In the last few months, three states (Illinois, Arkansas and South Dakota) have enacted “nexus expanding” legislation effective on July 1, 2011. Other states are considering adopting such legislation. The legislation falls into three categories: (1) click-through nexus; (2) reporting obligations; and (3) “affiliate” or “attributional nexus.”
We have previously written about the Illinois click-through nexus law (here and here), which we believe is unconstitutional since it purports to establish nexus (with no opportunity to rebut the determination) for any retailer that contracts with a person “located in Illinois” who receives a commission from the retailer based on sales of goods facilitated by a link from the person to the retailer’s web site. We will not describe here the details as to why the statute is unconstitutional, other than to note that mere national advertising, which is what the click-through represents, has never been deemed to create nexus, as pointed out in the Quill v. North Dakota case. In addition, online retailers should carefully review the Illinois statute and its requirements before deciding whether it applies to them.
The other recently-adopted nexus click-through legislation is the Arkansas law, which, unlike the Illinois statute, creates only a presumption of nexus that can be rebutted by a showing that the person maintaining the web site that provides a link does not engage in solicitation on behalf of the retailer. The statute is modeled after the New York statute, and it is possible for a retailer to structure its program with its Arkansas affiliates so as not to be subject to Arkansas sales tax collection obligations.
I also note that there is pending legislation in several states that is similar to the Arkansas statute and not the Illinois statute. (See our recent discussion of pending legislation here.)
The South Dakota statute requires all non-collecting retailers that have annual gross sales into South Dakota of $100,000 or more to provide a “transactional notice.” The transactional notice should appear both on the retailer’s web site and in catalogs and purchase orders/receipts. Because the law applies only to non-collecting retailers, who by definition do not have a physical presence in the state and who are out-of-state retailers, it suffers from the same constitutional infirmities that caused the Colorado federal court to issue a preliminary injunction staying the enforcement of a very similar statute in Colorado.See Direct Marketing Ass’n v. Huber, 2011 WL 250556 (D. Colo. 2011).
In the final category of statutes, both Arkansas and Illinois also provide for attributional nexus for commonly-owned companies when an affiliate has a physical presence in the state. The Illinois statute provides that an out-of-state retailer has nexus with the state if it has a contract with an affiliate who both sells a similar line of products under a substantially similar name as the online retailer and receives a commission from the out-of-state retailer. The Arkansas statute provides a more expansive definition of a company required to collect sales tax and bases its requirement upon either the retailer’s use of the in-state affiliate to act on behalf of the retailer or the retailer’s use of substantially similar trademarks or tradenames as used by the in-state affiliate.
In short, much of the new legislation is constitutionally suspect. How the states choose to enforce the laws, and how the industry reacts, is a work in progress. Individual companies should carefully review their own nexus profile and circumstances to determine the applicability of this new legislation.
We have previously written about the Illinois click-through nexus law (here and here), which we believe is unconstitutional since it purports to establish nexus (with no opportunity to rebut the determination) for any retailer that contracts with a person “located in Illinois” who receives a commission from the retailer based on sales of goods facilitated by a link from the person to the retailer’s web site. We will not describe here the details as to why the statute is unconstitutional, other than to note that mere national advertising, which is what the click-through represents, has never been deemed to create nexus, as pointed out in the Quill v. North Dakota case. In addition, online retailers should carefully review the Illinois statute and its requirements before deciding whether it applies to them.
The other recently-adopted nexus click-through legislation is the Arkansas law, which, unlike the Illinois statute, creates only a presumption of nexus that can be rebutted by a showing that the person maintaining the web site that provides a link does not engage in solicitation on behalf of the retailer. The statute is modeled after the New York statute, and it is possible for a retailer to structure its program with its Arkansas affiliates so as not to be subject to Arkansas sales tax collection obligations.
I also note that there is pending legislation in several states that is similar to the Arkansas statute and not the Illinois statute. (See our recent discussion of pending legislation here.)
The South Dakota statute requires all non-collecting retailers that have annual gross sales into South Dakota of $100,000 or more to provide a “transactional notice.” The transactional notice should appear both on the retailer’s web site and in catalogs and purchase orders/receipts. Because the law applies only to non-collecting retailers, who by definition do not have a physical presence in the state and who are out-of-state retailers, it suffers from the same constitutional infirmities that caused the Colorado federal court to issue a preliminary injunction staying the enforcement of a very similar statute in Colorado.See Direct Marketing Ass’n v. Huber, 2011 WL 250556 (D. Colo. 2011).
In the final category of statutes, both Arkansas and Illinois also provide for attributional nexus for commonly-owned companies when an affiliate has a physical presence in the state. The Illinois statute provides that an out-of-state retailer has nexus with the state if it has a contract with an affiliate who both sells a similar line of products under a substantially similar name as the online retailer and receives a commission from the out-of-state retailer. The Arkansas statute provides a more expansive definition of a company required to collect sales tax and bases its requirement upon either the retailer’s use of the in-state affiliate to act on behalf of the retailer or the retailer’s use of substantially similar trademarks or tradenames as used by the in-state affiliate.
In short, much of the new legislation is constitutionally suspect. How the states choose to enforce the laws, and how the industry reacts, is a work in progress. Individual companies should carefully review their own nexus profile and circumstances to determine the applicability of this new legislation.
Thursday, March 10, 2011
DMA v. Huber Update: Huber Appeals to Tenth Circuit
As we reported in January, the Direct Marketing Association (the "DMA") recently won a landmark preliminary injunction in its lawsuit against the State of Colorado. The preliminary injunction prohibits the Executive Director of the Colorado Department of Revenue from enforcing Colorado’s new notice and reporting law, H.B. 10-1193, which would require out-of-state direct marketers and online sellers who do not collect Colorado sales and use taxes to inform Colorado purchasers of their obligation to self-report tax and to provide Colorado customers summaries of their purchases, and also would require sellers to report specific customer purchase information to the State. As we wrote previously, the Court, in granting the preliminary injunction, found that the requirements of H.B. 10-1193 likely both violated the Commerce Clause and would cause irreparable harm to out-of-state retailers if enforced
On February 25, the Defendant filed an interlocutory appeal of the District Court’s order granting the preliminary injunction, seeking review of the injunction by the Tenth Circuit Court of Appeals. It will likely be six to nine months before the Tenth Circuit issues its ruling in the matter, but we will keep you updated as developments arise.
On February 25, the Defendant filed an interlocutory appeal of the District Court’s order granting the preliminary injunction, seeking review of the injunction by the Tenth Circuit Court of Appeals. It will likely be six to nine months before the Tenth Circuit issues its ruling in the matter, but we will keep you updated as developments arise.
Monday, February 14, 2011
Maine Introduces Modified, Colorado-Style Notice and Reporting Law, Which Also Likely Violates The Commerce Clause
On February 9, 2011, the Maine Legislature introduced a bill (LD 469) which would impose upon certain out-of-state retailers a set of notice and reporting obligations that closely parallel the requirements of Colorado’s 2010 law, H.B. 10-1193. Enforcement of H.B. 10-1193 was recently enjoined by a federal judge in Denver on the grounds that such requirements are likely unconstitutional and in violation of the Commerce Clause. As we have reported in prior posts, Brann & Isaacson represents the Direct Marketing Association in the federal court challenge to the now-suspended Colorado law, after which the Maine bill is patterned.
Maine’s LD 469 includes all three of the Colorado law’s notice and reporting requirements – retailers must provide the Transactional Notice, Annual Purchase Summaries to customers, and Customer Information Reports to revenue officials – and would impose penalties on affected retailers for non-compliance with the law. Notably, however, unlike the Colorado law, the Maine bill includes no $500 annual minimum purchase threshold to trigger the requirement that an affected retailer must send a customer an Annual Purchase Summary. Similar to Colorado’s law, under LD 469 such annual summaries to customers must include, if available, “[d]escriptions of items purchased,” as well as dates and amounts. Also in contrast to Colorado, the report to Maine Revenue Services must include all of the information provided to each purchaser in the annual summary – thereby requiring that at least descriptions of the items purchased by customers of an affected out-of-state retailer be turned over to Maine Revenue Services. The Maine bill thus raises even more significant privacy concerns for Maine consumers buying from affected retailers than does the privacy-invading Colorado law.
The Maine bill also appears to differ from the Colorado law in another respect: whereas the suspended Colorado law applies, by its terms, to all out-of-state retailers that do not collect Colorado sales tax, LD 469 imposes its onerous notice and reporting obligations only upon companies that are presumed to be doing business in the state because they are members of a “controlled group of corporations” that has at least one member who is already a retailer with a physical presence in the state. The Bill Summary states that “[t]his bill requires out-of-state retailers that are not required to collect sales tax and that are part of a controlled group of corporations with a connection in the State” to comply with the notice and reporting obligations. The apparent requirement that, to be subject to the law, an out-of-state retailer must have an affiliated retailer with physical presence in Maine, means that the proposed law would not apply to as broad a group of out-of-state companies as does the Colorado law.
What the sponsors of the bill apparently fail to recognize is that limiting the notice and reporting obligations to a more narrow group of out-of-state retailers who do not collect sales tax (i.e, only those who are part of a controlled group) does not change the fact that it discriminates against interstate commerce in violation of the Constitution. The Supreme Court has made it perfectly clear that a state cannot pick and choose which out-of-state companies it will discriminate against – even state laws that have imposed disparate treatment upon only a single out-of-state company that is not imposed upon in-state companies are virtually per se invalid under the Commerce Clause.
The prospects for passage of LD 469 are, at this point, entirely uncertain, so there is still time for Maine’s elected officials to avoid following in the footsteps of their Colorado counterparts. In addition to running afoul of over 180 years of established constitutional law, LD 469 is simply bad policy – invading the privacy of Maine citizens should never be viewed as a proper approach to promoting use tax reporting.
Since the new year, several other states, including Arizona, California, Connecticut, Hawaii, Illinois, New Mexico, South Dakota, Vermont, and Texas, have introduced new notice and reporting bills, or “Amazon” affiliate-nexus legislation. Stay tuned for an update on the progress of these bills.
Maine’s LD 469 includes all three of the Colorado law’s notice and reporting requirements – retailers must provide the Transactional Notice, Annual Purchase Summaries to customers, and Customer Information Reports to revenue officials – and would impose penalties on affected retailers for non-compliance with the law. Notably, however, unlike the Colorado law, the Maine bill includes no $500 annual minimum purchase threshold to trigger the requirement that an affected retailer must send a customer an Annual Purchase Summary. Similar to Colorado’s law, under LD 469 such annual summaries to customers must include, if available, “[d]escriptions of items purchased,” as well as dates and amounts. Also in contrast to Colorado, the report to Maine Revenue Services must include all of the information provided to each purchaser in the annual summary – thereby requiring that at least descriptions of the items purchased by customers of an affected out-of-state retailer be turned over to Maine Revenue Services. The Maine bill thus raises even more significant privacy concerns for Maine consumers buying from affected retailers than does the privacy-invading Colorado law.
The Maine bill also appears to differ from the Colorado law in another respect: whereas the suspended Colorado law applies, by its terms, to all out-of-state retailers that do not collect Colorado sales tax, LD 469 imposes its onerous notice and reporting obligations only upon companies that are presumed to be doing business in the state because they are members of a “controlled group of corporations” that has at least one member who is already a retailer with a physical presence in the state. The Bill Summary states that “[t]his bill requires out-of-state retailers that are not required to collect sales tax and that are part of a controlled group of corporations with a connection in the State” to comply with the notice and reporting obligations. The apparent requirement that, to be subject to the law, an out-of-state retailer must have an affiliated retailer with physical presence in Maine, means that the proposed law would not apply to as broad a group of out-of-state companies as does the Colorado law.
What the sponsors of the bill apparently fail to recognize is that limiting the notice and reporting obligations to a more narrow group of out-of-state retailers who do not collect sales tax (i.e, only those who are part of a controlled group) does not change the fact that it discriminates against interstate commerce in violation of the Constitution. The Supreme Court has made it perfectly clear that a state cannot pick and choose which out-of-state companies it will discriminate against – even state laws that have imposed disparate treatment upon only a single out-of-state company that is not imposed upon in-state companies are virtually per se invalid under the Commerce Clause.
The prospects for passage of LD 469 are, at this point, entirely uncertain, so there is still time for Maine’s elected officials to avoid following in the footsteps of their Colorado counterparts. In addition to running afoul of over 180 years of established constitutional law, LD 469 is simply bad policy – invading the privacy of Maine citizens should never be viewed as a proper approach to promoting use tax reporting.
Since the new year, several other states, including Arizona, California, Connecticut, Hawaii, Illinois, New Mexico, South Dakota, Vermont, and Texas, have introduced new notice and reporting bills, or “Amazon” affiliate-nexus legislation. Stay tuned for an update on the progress of these bills.
Thursday, January 27, 2011
DMA Wins Landmark Injunction Against State of Colorado
On behalf of the Direct Marketing Association, Brann & Isaacson partners George Isaacson and Matthew Schaefer won a landmark preliminary injunction in federal court in a lawsuit that affects thousands of direct marketers across the country. The ruling prohibits the State of Colorado from enforcing its controversial new law, H.B. 10-1193, that required direct marketers to -- among other things -- report to the state the names, addresses, and purchase amounts of their customers.
To be clear, so long as the injunction remains in place, out-of-state retailers that do not have nexus with Colorado and do not collect Colorado sales tax are no longer required to: (1) give notice to their Colorado customers, in connection with each sale, that the customer must report Colorado use tax (the “Transactional Notice”); (2) send via First Class mail by January 31, to each customer that purchased more than $500 of goods for delivery to Colorado during 2010, a summary of their purchases for the year (the “Annual Purchase Summary”); or (3) submit a report to the Colorado Department of Revenue, by March 1, listing the name, billing and shipping addresses, and total amount of purchases of all customers who purchased goods for delivery to Colorado (the “Customer Information Report”). See http://www.colorado.gov/cs/Satellite/Revenue/REVX/1251581938320.
The DMA argued that the law violates the Commerce Clause of the United States Constitution by (a) imposing discriminatory obligations upon out-of-state retailers that do not apply to in-state Colorado retailers, and (b) unduly burdening interstate commerce under principles set forth by the Supreme Court in Quill Corp. v. North Dakota, 504 U.S. 298 (1992). The Court accepted these arguments in finding that the DMA had a likelihood of success on both Commerce Clause counts, and concluded that out-of-state retailers subject to the new law would suffer irreparable harm if enforcement of the statute is not barred.
The preliminary injunction entered by the Court does not end the case, but it effectively suspends the law while the litigation continues and until the Court makes a final ruling regarding the law’s constitutionality.
You can read a copy of the order here.
Read previous posts about the lawsuit here and here.
To be clear, so long as the injunction remains in place, out-of-state retailers that do not have nexus with Colorado and do not collect Colorado sales tax are no longer required to: (1) give notice to their Colorado customers, in connection with each sale, that the customer must report Colorado use tax (the “Transactional Notice”); (2) send via First Class mail by January 31, to each customer that purchased more than $500 of goods for delivery to Colorado during 2010, a summary of their purchases for the year (the “Annual Purchase Summary”); or (3) submit a report to the Colorado Department of Revenue, by March 1, listing the name, billing and shipping addresses, and total amount of purchases of all customers who purchased goods for delivery to Colorado (the “Customer Information Report”). See http://www.colorado.gov/cs/Satellite/Revenue/REVX/1251581938320.
The DMA argued that the law violates the Commerce Clause of the United States Constitution by (a) imposing discriminatory obligations upon out-of-state retailers that do not apply to in-state Colorado retailers, and (b) unduly burdening interstate commerce under principles set forth by the Supreme Court in Quill Corp. v. North Dakota, 504 U.S. 298 (1992). The Court accepted these arguments in finding that the DMA had a likelihood of success on both Commerce Clause counts, and concluded that out-of-state retailers subject to the new law would suffer irreparable harm if enforcement of the statute is not barred.
The preliminary injunction entered by the Court does not end the case, but it effectively suspends the law while the litigation continues and until the Court makes a final ruling regarding the law’s constitutionality.
You can read a copy of the order here.
Read previous posts about the lawsuit here and here.
Thursday, January 6, 2011
DMA’s Constitutional Challenge to Colorado’s Notice and Reporting Law Will Be Argued In Federal District Court on January 13
A happy new year to our readers. Many internet and catalog retailers have been following with interest the constitutional challenge of the Direct Marketing Association (“DMA”) to Colorado’s new notice and reporting law, H.B. 10-1193, enacted in 2010. In addition to burdensome consumer notice requirements that went into effect last year, the law requires out-of-state retailers that do not collect Colorado sales and use tax to send (by January 31, 2011) annual purchase summaries to customers purchasing $500 or more of goods for shipment to Colorado and, worst of all, to file (by March 1, 2011) with the Colorado Department of Revenue a listing of all of the retailer’s customers who have purchased goods for shipment to a Colorado location, regardless of where the customer resides.
As we previously reported (see our July 2, 2010 post), the DMA contends that the Colorado law violates multiple provisions of the United States Constitution, because it discriminates against interstate commerce, exceeds the State’s regulatory authority over out-of-state businesses, violates the privacy rights of Colorado consumers, infringes the free speech and due process rights of retailers and consumers, and deprives retailers of their valuable customer list information without due process or fair compensation. The DMA has filed a motion for preliminary injunction based on the law’s violations of the Commerce Clause, asking the Court to suspend enforcement of the law’s notice and reporting requirements pending a full adjudication of the law’s constitutionality.
The federal District Court for the District of Colorado has scheduled a hearing on the DMA’s motion to be held on January 13, 2011, at 10:00 a.m. in Denver. B&I senior partner and lead counsel for the DMA, George Isaacson, will argue the motion on behalf of the DMA. We will report on further developments after the hearing.
As we previously reported (see our July 2, 2010 post), the DMA contends that the Colorado law violates multiple provisions of the United States Constitution, because it discriminates against interstate commerce, exceeds the State’s regulatory authority over out-of-state businesses, violates the privacy rights of Colorado consumers, infringes the free speech and due process rights of retailers and consumers, and deprives retailers of their valuable customer list information without due process or fair compensation. The DMA has filed a motion for preliminary injunction based on the law’s violations of the Commerce Clause, asking the Court to suspend enforcement of the law’s notice and reporting requirements pending a full adjudication of the law’s constitutionality.
The federal District Court for the District of Colorado has scheduled a hearing on the DMA’s motion to be held on January 13, 2011, at 10:00 a.m. in Denver. B&I senior partner and lead counsel for the DMA, George Isaacson, will argue the motion on behalf of the DMA. We will report on further developments after the hearing.
Tuesday, January 4, 2011
Distribution of Promotional Materials in Indiana is Not Taxable
In D.H. Holmes Company, Ltd. v. McNamara, 486 U.S. 24 (1988), the U.S. Supreme Court held that a state did not violate the Commerce Clause when it imposed a use tax on the distribution of catalogs and other promotional materials mailed from outside of the state since the company on whose behalf the catalogs were distributed had nexus with the state. Prior to that date, there were some state courts and tax commentators which had declared that a destination state’s imposition of tax on catalogs printed and mailed from outside of the state to residents of the state violated the Commerce Clause.
As a result of the D.H. Holmes decision, a large number of states have imposed a use tax on promotional materials distributed in their state on behalf of a company with nexus in the state (e.g. Arizona, Colorado, Connecticut, Florida, Georgia, and Tennessee). There have been some exceptions to this rule (See e.g., Michigan (Sharper Image Corp. v. Department of Treasury, 550 N.W.2d 596 (1996)), New York, Ohio, California, and Pennsylvania).
Recently, the Indiana Tax Court ruled in the case of AOL, LLC v. Indiana Department of State Revenue that the distribution of CD ROMs and other marketing materials on behalf of AOL by AOL’s printer and assembly house was not taxable. The basis for the decision was that AOL had supplied the components—the CD ROM discs, paper, and other components of CD ROM packages—to the assembly house and printer. Thus, the assembly house and printer were merely providing a service, and not selling tangible personal property. Under the Indiana statute, the provision of services is not taxable. It is only the sale of tangible personal property that is taxable. Nor were the components themselves taxable because only the final CD ROM package and printed materials were distributed in Indiana. The components were transformed by the assembly houses and printers into final products.
This decision is in line with prior decisions of the Indiana Tax Court, including Ameritech Publ’g, Inc. v. Ind. Dep’t of State Revenue, 916 N.E.2d 752 (Ind. Tax Ct. 2009) and Morton Bldgs., Inc. v. Ind. Dep’t of State Revenue, 819 N.E.2d 913 (Ind. Tax Ct. 2004). Thus, any direct marketer which has been distributing promotional materials in Indiana and paying use tax on those promotional materials should consider filing a claim for refund for taxes paid if the direct marketer supplied the underlying raw materials to the printer or other party assembling the promotional materials.
As a result of the D.H. Holmes decision, a large number of states have imposed a use tax on promotional materials distributed in their state on behalf of a company with nexus in the state (e.g. Arizona, Colorado, Connecticut, Florida, Georgia, and Tennessee). There have been some exceptions to this rule (See e.g., Michigan (Sharper Image Corp. v. Department of Treasury, 550 N.W.2d 596 (1996)), New York, Ohio, California, and Pennsylvania).
Recently, the Indiana Tax Court ruled in the case of AOL, LLC v. Indiana Department of State Revenue that the distribution of CD ROMs and other marketing materials on behalf of AOL by AOL’s printer and assembly house was not taxable. The basis for the decision was that AOL had supplied the components—the CD ROM discs, paper, and other components of CD ROM packages—to the assembly house and printer. Thus, the assembly house and printer were merely providing a service, and not selling tangible personal property. Under the Indiana statute, the provision of services is not taxable. It is only the sale of tangible personal property that is taxable. Nor were the components themselves taxable because only the final CD ROM package and printed materials were distributed in Indiana. The components were transformed by the assembly houses and printers into final products.
This decision is in line with prior decisions of the Indiana Tax Court, including Ameritech Publ’g, Inc. v. Ind. Dep’t of State Revenue, 916 N.E.2d 752 (Ind. Tax Ct. 2009) and Morton Bldgs., Inc. v. Ind. Dep’t of State Revenue, 819 N.E.2d 913 (Ind. Tax Ct. 2004). Thus, any direct marketer which has been distributing promotional materials in Indiana and paying use tax on those promotional materials should consider filing a claim for refund for taxes paid if the direct marketer supplied the underlying raw materials to the printer or other party assembling the promotional materials.
Monday, September 13, 2010
Oklahoma Adopts a Gross Receipts Tax Providing for “Economic Presence” Nexus
Oklahoma has been in the news recently because of its enactment of a controversial sales tax statute, similar to the Colorado statute, that requires companies which do not collect and remit the Oklahoma sales and use tax because of their lack of physical presence to provide notification to Oklahoma purchasers of the purchasers’ obligation to remit sales and use tax. (See our related blog posts of June 24, July 1, and July 9.) In addition, Oklahoma has recently adopted a Business Activity Tax, which is in lieu of the franchise tax, and which requires any company with sales greater than $500,000 to Oklahoma destinations, regardless of the company’s physical presence in Oklahoma, to pay a tax of 1% of its gross sales revenue to Oklahoma residents. The Business Activity Tax legislation, like the sales tax legislation, ignores the Quill physical presence test, and bases nexus on the “economic presence” of an out-of-state company; i.e., greater than $500,000 of gross receipts from an Oklahoma source. The Business Activity Tax, insofar as the tax on gross receipts, does not go into effect until calendar year 2013.
As we wrote in our prior blog posts with regard to other state statutes based on an economic presence, the Oklahoma statute raises significant constitutional concerns. There is good U.S. Supreme Court precedent that stands for the proposition that the Quill/Bellas Hess physical presence standard of nexus applies to gross receipts taxes. See Tyler Pipe Industries, Inc. v. Washington Department of Revenue, 483 U.S. 232, 107 S.Ct. 2810 (1987); Commonwealth Edison Company v. State of Montana, 453 U.S. 609, 101 S.Ct. 2946 (1981).
As we wrote in our prior blog posts with regard to other state statutes based on an economic presence, the Oklahoma statute raises significant constitutional concerns. There is good U.S. Supreme Court precedent that stands for the proposition that the Quill/Bellas Hess physical presence standard of nexus applies to gross receipts taxes. See Tyler Pipe Industries, Inc. v. Washington Department of Revenue, 483 U.S. 232, 107 S.Ct. 2810 (1987); Commonwealth Edison Company v. State of Montana, 453 U.S. 609, 101 S.Ct. 2946 (1981).
Tuesday, August 31, 2010
Update: California Senate Moves Tax Bill to Inactive File
As we’ve written previously (here, here, and here), the California legislature has been considering legislation that may impose potentially unconstitutional requirements on out-of-state retailers selling to California customers.
On May 6, the State Assembly passed AB 2078, Colorado-style legislation that would require out-of-state retailers to provide notice to California customers via the retailers' websites and in their catalogues of the customers’ potential use tax obligations. Previous versions of the Assembly Bill had required such retailers to file quarterly reports with the names, addresses and amounts purchased by California customers, and also created a rebuttable presumption that for any controlled group of corporations, if one member was engaged in business in California, all members would be deemed to be engaged in business in California. As passed by the Assembly, however, only the Bill’s provisions requiring that notice of use tax obligations be provided to California customers survived.
The State Senate has since taken up consideration of the Bill and made its own amendments. In the Bill currently before the Senate, the presumptions regarding controlled groups were reinserted, and the notice provisions were kept in. The Senate did not reinsert the reporting requirements of the original Assembly Bill.
However, the State Senate has yet to vote on the Bill. Instead, yesterday, the Senate moved the Bill to the Senate’s inactive file on a motion by one of the State Senators, likely because today marks the last day on the Senate calendar for any bill to be passed before the Senate’s final recess begins. Although the Bill may be moved off the inactive file, it appears that the California Senate will not be voting on it any time soon. In the meantime, we’ll continue tracking any action on the Bill and keep you posted of developments as they arise.
UPDATE, Jul. 5, 2011: California has enacted a new nexus law.
On May 6, the State Assembly passed AB 2078, Colorado-style legislation that would require out-of-state retailers to provide notice to California customers via the retailers' websites and in their catalogues of the customers’ potential use tax obligations. Previous versions of the Assembly Bill had required such retailers to file quarterly reports with the names, addresses and amounts purchased by California customers, and also created a rebuttable presumption that for any controlled group of corporations, if one member was engaged in business in California, all members would be deemed to be engaged in business in California. As passed by the Assembly, however, only the Bill’s provisions requiring that notice of use tax obligations be provided to California customers survived.
The State Senate has since taken up consideration of the Bill and made its own amendments. In the Bill currently before the Senate, the presumptions regarding controlled groups were reinserted, and the notice provisions were kept in. The Senate did not reinsert the reporting requirements of the original Assembly Bill.
However, the State Senate has yet to vote on the Bill. Instead, yesterday, the Senate moved the Bill to the Senate’s inactive file on a motion by one of the State Senators, likely because today marks the last day on the Senate calendar for any bill to be passed before the Senate’s final recess begins. Although the Bill may be moved off the inactive file, it appears that the California Senate will not be voting on it any time soon. In the meantime, we’ll continue tracking any action on the Bill and keep you posted of developments as they arise.
UPDATE, Jul. 5, 2011: California has enacted a new nexus law.
Friday, July 9, 2010
Oklahoma (again)!
This post is not a repeat of the successful musical. Rather, it is yet another blog post on the Oklahoma tax statute to supplement our posts of June 24 and July 1. The Oklahoma Tax Commission has recently proposed emergency regulations that purport to implement the notice requirements of the recently-adopted Oklahoma statute. As reported in our blog post of June 24, the Oklahoma statute is “Colorado-like,” inasmuch as it requires notice with each sale to an Oklahoma consumer by a direct marketer that does not have substantial nexus with Oklahoma. However, the statute provides that the notice is not effective until the Tax Commission has adopted regulations implementing the statute. Hence, the proposed regulations circulated by the Tax Commission, which become effective when approved by the governor.
The regulations require that the “required notice” be included (i) on the retailer’s website or in the retailer’s catalog; and (ii) on each invoice provided by the retailer. The regulations also prescribe that if the retailer does not provide invoices, the retailer must send a confirmatory email containing the required notice. The “required notice” must include the following disclosures:(1) the retailer is not required to collect, and does not collect, Oklahoma use tax; (2) the purchase is subject to Oklahoma use tax, unless exempt; (3) the purchase is not exempt because it is made over the Internet, by catalog or other remote means; (4) the State of Oklahoma requires Oklahoma purchasers to report, by filing a consumer use tax return or disclosing the same on the individual income tax return, all use tax due on out-of-state purchases and to pay such tax with the report or return; and (5) the forms and instructions for consumers to report and pay the Oklahoma use tax are available on the Oklahoma Tax Commission web site, www.tax.ok.gov.
There are significant issues regarding the proposed regulations. They go beyond the statutory authorization. First of all, there is no requirement in the statute for email confirmation if the retailer does not use invoices. Second, the detailed specifications of the notice, as set forth in the proposed rule, go well beyond the requirements of the statute and will place significant burdens on remote sellers. Third, the statute does not appear to require both notice on the retailer’s Internet website and inclusion of notice on invoices.
In addition to the fact that the proposed regulations exceed the requirements of the statute, the regulations, in combination with the statute, present significant questions of violation of the Commerce Clause of the U.S. Constitution. These are similar to those raised by the Colorado statute and regulations. See our blog post of July 2.
The regulations require that the “required notice” be included (i) on the retailer’s website or in the retailer’s catalog; and (ii) on each invoice provided by the retailer. The regulations also prescribe that if the retailer does not provide invoices, the retailer must send a confirmatory email containing the required notice. The “required notice” must include the following disclosures:(1) the retailer is not required to collect, and does not collect, Oklahoma use tax; (2) the purchase is subject to Oklahoma use tax, unless exempt; (3) the purchase is not exempt because it is made over the Internet, by catalog or other remote means; (4) the State of Oklahoma requires Oklahoma purchasers to report, by filing a consumer use tax return or disclosing the same on the individual income tax return, all use tax due on out-of-state purchases and to pay such tax with the report or return; and (5) the forms and instructions for consumers to report and pay the Oklahoma use tax are available on the Oklahoma Tax Commission web site, www.tax.ok.gov.
There are significant issues regarding the proposed regulations. They go beyond the statutory authorization. First of all, there is no requirement in the statute for email confirmation if the retailer does not use invoices. Second, the detailed specifications of the notice, as set forth in the proposed rule, go well beyond the requirements of the statute and will place significant burdens on remote sellers. Third, the statute does not appear to require both notice on the retailer’s Internet website and inclusion of notice on invoices.
In addition to the fact that the proposed regulations exceed the requirements of the statute, the regulations, in combination with the statute, present significant questions of violation of the Commerce Clause of the U.S. Constitution. These are similar to those raised by the Colorado statute and regulations. See our blog post of July 2.
Friday, July 2, 2010
B&I Files Constitutional Challenge to Colorado Notice and Reporting Law for The Direct Marketing Association
We've blogged frequently about Colorado's new notice and reporting law (see here and here).
Since our last posts on the topic, Brann & Isaacson's George Isaacson and Matthew Schaefer filed suit in federal district court in Colorado on behalf of The Direct Marketing Association in The Direct Marketing Association v. Roxy Huber. Filed on June 30, the suit challenges the constitutionality of the new Colorado law.
The Colorado statute, which targets out-of-state retailers, purports to require those retailers to notify Colorado customers of their obligation to self-report use tax and to require those same retailers to turn over confidential purchasing information regarding Colorado customers to the Colorado Department of Revenue. In the complaint, the DMA, the leading global trade association of direct marketing businesses and nonprofit organizations, asserts that the Colorado statute discriminates against interstate commerce, exceeds the State’s regulatory authority over out-of-state businesses, violates the privacy rights of Colorado consumers, infringes the free speech and due process rights of retailers and consumers, and exposes confidential consumer information to the risk of unauthorized disclosure.
We'll continue updating you as developments arise.
Have a safe and happy Independence Day!
Since our last posts on the topic, Brann & Isaacson's George Isaacson and Matthew Schaefer filed suit in federal district court in Colorado on behalf of The Direct Marketing Association in The Direct Marketing Association v. Roxy Huber. Filed on June 30, the suit challenges the constitutionality of the new Colorado law.
The Colorado statute, which targets out-of-state retailers, purports to require those retailers to notify Colorado customers of their obligation to self-report use tax and to require those same retailers to turn over confidential purchasing information regarding Colorado customers to the Colorado Department of Revenue. In the complaint, the DMA, the leading global trade association of direct marketing businesses and nonprofit organizations, asserts that the Colorado statute discriminates against interstate commerce, exceeds the State’s regulatory authority over out-of-state businesses, violates the privacy rights of Colorado consumers, infringes the free speech and due process rights of retailers and consumers, and exposes confidential consumer information to the risk of unauthorized disclosure.
We'll continue updating you as developments arise.
Have a safe and happy Independence Day!
Thursday, July 1, 2010
Oklahoma Seeks to Expand the Definition of Nexus for Internet and Catalog Retailers
In our blog post last week, we discussed the new Oklahoma sales tax statute, which contains a “Colorado-like” reporting requirement for those Internet and catalog sellers that do not collect and remit the Oklahoma sales and use tax. As a second part of the statute, the Oklahoma legislature also expanded the definition of those companies that are engaged in the business of selling tangible personal property for use in Oklahoma; i.e. those companies required to register to collect and remit the Oklahoma sales and use tax. This part of the statute, like the reporting requirements section, is not the model of clarity, so there is some ambiguity in the statute.
First, the statute provides for “affiliate nexus” attribution. Thus, under the new law a retailer that otherwise does not have nexus based on its own activities (an out-of-state retailer) is deemed to have nexus if it and another retailer that has nexus with Oklahoma are commonly-owned, and if: (i) the Oklahoma-retailer sells the same or a “substantially similar” line of products under the same trade name as that of the non-nexus retailer (the so-called multi-channel retailer); (ii) the facilities or employees of the Oklahoma retailer are used to advertise, promote or facilitate sales by the out-of-state retailer; or (iii) the in-state retailer has a warehouse or similar place of business in Oklahoma that is used to deliver property to the out-of-state retailer’s customers, as in a drop ship relationship. Additionally, any retailer that is part of a controlled group (as defined under the Internal Revenue Code) faces a rebuttable presumption that it is engaged in business in Oklahoma if a component member of the controlled group is engaged in any of the activities described above. The presumption can be rebutted if the retailer shows that the component member did not do any of those activities on behalf of the retailer. The foregoing provisions are more comprehensive than those of other state statutes, which have some but not all of the provisions regarding common ownership. Colorado’s statute, for example, provides for a presumption of nexus similar to that described for members of controlled groups above and Arkansas’ statute contains a similar provision to that of the first category.
The statutory definition of retailer is also expanded to now include an out-of-state company that has a “contractual relationship with an entity to provide and perform installation or maintenance services for the retailer’s purchasers” in Oklahoma. This statutory provision is similar but not identical to that in Virginia. Va. Code § 58.1-612.
Of course, even if a retailer satisfies the standard under this new law, unless the retailer has nexus under the Quill Commerce Clause test, Oklahoma would not be justified in requiring sales tax collection from the retailer. Several of the provisions in the new law raise significant constitutional law questions. Please see, for example, the recent U.S. District Court for Louisiana decision in St. Tammany Parish Tax Collector v. Barnesandnoble.com, Civ. Act. No. 05-5695 (E.D. La., March 22, 2007).
First, the statute provides for “affiliate nexus” attribution. Thus, under the new law a retailer that otherwise does not have nexus based on its own activities (an out-of-state retailer) is deemed to have nexus if it and another retailer that has nexus with Oklahoma are commonly-owned, and if: (i) the Oklahoma-retailer sells the same or a “substantially similar” line of products under the same trade name as that of the non-nexus retailer (the so-called multi-channel retailer); (ii) the facilities or employees of the Oklahoma retailer are used to advertise, promote or facilitate sales by the out-of-state retailer; or (iii) the in-state retailer has a warehouse or similar place of business in Oklahoma that is used to deliver property to the out-of-state retailer’s customers, as in a drop ship relationship. Additionally, any retailer that is part of a controlled group (as defined under the Internal Revenue Code) faces a rebuttable presumption that it is engaged in business in Oklahoma if a component member of the controlled group is engaged in any of the activities described above. The presumption can be rebutted if the retailer shows that the component member did not do any of those activities on behalf of the retailer. The foregoing provisions are more comprehensive than those of other state statutes, which have some but not all of the provisions regarding common ownership. Colorado’s statute, for example, provides for a presumption of nexus similar to that described for members of controlled groups above and Arkansas’ statute contains a similar provision to that of the first category.
The statutory definition of retailer is also expanded to now include an out-of-state company that has a “contractual relationship with an entity to provide and perform installation or maintenance services for the retailer’s purchasers” in Oklahoma. This statutory provision is similar but not identical to that in Virginia. Va. Code § 58.1-612.
Of course, even if a retailer satisfies the standard under this new law, unless the retailer has nexus under the Quill Commerce Clause test, Oklahoma would not be justified in requiring sales tax collection from the retailer. Several of the provisions in the new law raise significant constitutional law questions. Please see, for example, the recent U.S. District Court for Louisiana decision in St. Tammany Parish Tax Collector v. Barnesandnoble.com, Civ. Act. No. 05-5695 (E.D. La., March 22, 2007).
Thursday, June 24, 2010
Oklahoma’s New “Colorado-Like” Statute
As we have written in several previous posts, Colorado enacted an onerous reporting requirement for those remote sellers that do not collect and remit the Colorado sales and use tax. The Colorado statute requires such remote sellers to provide three types of notices that they do not collect the Colorado sales and use tax, even though they do not have nexus with Colorado under the Quill standard. Brann & Isaacson, on behalf of the Direct Marketing Association, will be challenging the constitutionality of the statute in a suit to be filed shortly, because the Colorado statute applies to companies that lack nexus.
On June 9, Oklahoma enacted a “Colorado-like” statute, HB 2359, that requires that any retailer that sells tangible personal property to Oklahoma residents must “provide notification on its retail Internet web site or retail catalog and invoices provided to its customers that use tax is imposed and must be paid by the purchaser.” (emphasis added). The statute is Colorado-like in the sense that retailers without nexus are required to provide notice regarding the fact that sales and use tax is due on purchases, but it does not contain the Colorado provisions requiring retailers to provide annual notice (i) to purchasers of the volume of their purchases and that tax should be remitted to the Department of Revenue; and (ii) to the Department of Revenue of their Colorado purchasers and the volume of purchases made during the preceding year. Thus, the Oklahoma statute does not require annual notice to customers of their purchases in the preceding year or an annual report to the Oklahoma Tax Commission, the agency responsible for enforcing the sales tax law, of Oklahoma purchasers from the retailer.
Even the notice that is required under the Oklahoma statute is different than that required under the Colorado statute. The law requires notice on the “Internet web site or retail catalog and invoices provided to consumers.” The use of the word “or” in the statute indicates that a retailer has a choice. It can provide notice on its web site or it may insert notice in its retail catalog and any invoices provided to consumers. It is unclear whether that was the intent of the legislators when adopting the statute. But that is irrelevant, given the statutory interpretation principle that resort to legislative history is permitted only when a statute is ambiguous. There is no ambiguity in the statute. It clearly gives the retailer the choice. The statute did not use the conjunctive phrase “and” between “Internet web site” and “retail catalog and invoices.”
Even if notice is not provided on the web site, a good argument can be made that notice in the catalogs alone is sufficient if the retailer does not provide invoices. We know that many online sellers do not provide invoices. Again, the language of the statute provides for notice in the catalog “and invoices provided to its customers.” So, if a retailer does not provide invoices to customers, under the literal language of the statute the retailer would not be required to provide the notice.
It should also be noted that, although the statute is effective as of July 1, 2010, the notice provisions are not effective until the Oklahoma Tax Commission has adopted a rule implementing the statute. Thus, we will need to review the rule when adopted in order to assess the kind of notice that Oklahoma Tax Commission feels is required.
On June 9, Oklahoma enacted a “Colorado-like” statute, HB 2359, that requires that any retailer that sells tangible personal property to Oklahoma residents must “provide notification on its retail Internet web site or retail catalog and invoices provided to its customers that use tax is imposed and must be paid by the purchaser.” (emphasis added). The statute is Colorado-like in the sense that retailers without nexus are required to provide notice regarding the fact that sales and use tax is due on purchases, but it does not contain the Colorado provisions requiring retailers to provide annual notice (i) to purchasers of the volume of their purchases and that tax should be remitted to the Department of Revenue; and (ii) to the Department of Revenue of their Colorado purchasers and the volume of purchases made during the preceding year. Thus, the Oklahoma statute does not require annual notice to customers of their purchases in the preceding year or an annual report to the Oklahoma Tax Commission, the agency responsible for enforcing the sales tax law, of Oklahoma purchasers from the retailer.
Even the notice that is required under the Oklahoma statute is different than that required under the Colorado statute. The law requires notice on the “Internet web site or retail catalog and invoices provided to consumers.” The use of the word “or” in the statute indicates that a retailer has a choice. It can provide notice on its web site or it may insert notice in its retail catalog and any invoices provided to consumers. It is unclear whether that was the intent of the legislators when adopting the statute. But that is irrelevant, given the statutory interpretation principle that resort to legislative history is permitted only when a statute is ambiguous. There is no ambiguity in the statute. It clearly gives the retailer the choice. The statute did not use the conjunctive phrase “and” between “Internet web site” and “retail catalog and invoices.”
Even if notice is not provided on the web site, a good argument can be made that notice in the catalogs alone is sufficient if the retailer does not provide invoices. We know that many online sellers do not provide invoices. Again, the language of the statute provides for notice in the catalog “and invoices provided to its customers.” So, if a retailer does not provide invoices to customers, under the literal language of the statute the retailer would not be required to provide the notice.
It should also be noted that, although the statute is effective as of July 1, 2010, the notice provisions are not effective until the Oklahoma Tax Commission has adopted a rule implementing the statute. Thus, we will need to review the rule when adopted in order to assess the kind of notice that Oklahoma Tax Commission feels is required.
Monday, June 21, 2010
California Reinserts Reporting Requirements; Tennessee’s Proposal to Expand Nexus Dies in Committee
We’ve been tracking developments in affiliate nexus legislation and attempts to impose Colorado-style reporting requirements on vendors in other states. Since our last updates (here and here), there have been further developments of note:
California
On May 14, we wrote that the California Assembly nixed proposed affiliate nexus legislation and Colorado-style reporting requirements before passing its bill onto the State’s Senate. As in the Assembly’s version, the current iteration of the bill provides that retailers not required to collect use tax provide readily visible notice on their websites and catalogues that use tax is due from the purchaser. Last week, however, the California Senate amended the bill to reinsert reporting requirements.
Under the amended bill, the “[State Board of Equalization] may require the filing of reports” by any person having possession or custody of information relating to sales of tangible personal property (“TPP”) subject to the tax. § 7055(a) (as proposed) (emphasis added). It is unclear to whom, exactly, this possible reporting requirement applies, but the reports “shall be filed when the board requires” and must include names and addresses of purchasers of TPP, the sales price of the TPP, the date of the sale and “such other information as the board may require.”
Additionally, the proposed subsections (b)(1) and (2) indicate mandatory reporting for vendors not registered to collect sales tax whose sales exceed a relatively modest threshold. The subsections require “every person that is not registered with the board” that sells TPP subject to use tax, to file quarterly reports including names, addresses, sales prices, the dates of sales, and “such other information as the board may require.” Subsection (b)(2) provides that the reporting requirement in (b)(1) does not apply to persons whose receipts are less than $100,000 in the prior year and who are reasonably expected to have receipts less than $100,000 in the current year.
It is unclear whether the Senate’s version will survive the legislative process. If the amended bill is passed by the Senate, it must go back before the Assembly for agreement on the amendments. If the Assembly does not agree with the Senate’s amendments, it will be referred to a conference committee formed of members of both houses to resolve any differences.
We will continue tracking the progress of the bill to keep you informed of any new reporting requirements that may be imposed by the State. We also reiterate our previously-stated concerns: that the proposed bill imposes even more onerous reporting obligations than the Colorado statute, and that it may encourage other states to follow suit in attempts to regulate interstate commerce.
Tennessee
We last wrote about Tennessee in April, noting that the State’s affiliate nexus bill had been recommended for passage, but that the State’s Department of Revenue had indicated that it did not believe a mere affiliate relationship would be adequate for a finding of nexus. The legislation has since died in committee, when the General Assembly adjourned on June 10. Only time will tell whether Tennessee intends to make a second run at imposing affiliate nexus rules on out-of-state vendors.
UPDATE, Aug. 31, 2010: Please see our most recent post concerning the status of the California Bill here.
UPDATE, Jul. 5, 2011: California has enacted a new nexus law.
California
On May 14, we wrote that the California Assembly nixed proposed affiliate nexus legislation and Colorado-style reporting requirements before passing its bill onto the State’s Senate. As in the Assembly’s version, the current iteration of the bill provides that retailers not required to collect use tax provide readily visible notice on their websites and catalogues that use tax is due from the purchaser. Last week, however, the California Senate amended the bill to reinsert reporting requirements.
Under the amended bill, the “[State Board of Equalization] may require the filing of reports” by any person having possession or custody of information relating to sales of tangible personal property (“TPP”) subject to the tax. § 7055(a) (as proposed) (emphasis added). It is unclear to whom, exactly, this possible reporting requirement applies, but the reports “shall be filed when the board requires” and must include names and addresses of purchasers of TPP, the sales price of the TPP, the date of the sale and “such other information as the board may require.”
Additionally, the proposed subsections (b)(1) and (2) indicate mandatory reporting for vendors not registered to collect sales tax whose sales exceed a relatively modest threshold. The subsections require “every person that is not registered with the board” that sells TPP subject to use tax, to file quarterly reports including names, addresses, sales prices, the dates of sales, and “such other information as the board may require.” Subsection (b)(2) provides that the reporting requirement in (b)(1) does not apply to persons whose receipts are less than $100,000 in the prior year and who are reasonably expected to have receipts less than $100,000 in the current year.
It is unclear whether the Senate’s version will survive the legislative process. If the amended bill is passed by the Senate, it must go back before the Assembly for agreement on the amendments. If the Assembly does not agree with the Senate’s amendments, it will be referred to a conference committee formed of members of both houses to resolve any differences.
We will continue tracking the progress of the bill to keep you informed of any new reporting requirements that may be imposed by the State. We also reiterate our previously-stated concerns: that the proposed bill imposes even more onerous reporting obligations than the Colorado statute, and that it may encourage other states to follow suit in attempts to regulate interstate commerce.
Tennessee
We last wrote about Tennessee in April, noting that the State’s affiliate nexus bill had been recommended for passage, but that the State’s Department of Revenue had indicated that it did not believe a mere affiliate relationship would be adequate for a finding of nexus. The legislation has since died in committee, when the General Assembly adjourned on June 10. Only time will tell whether Tennessee intends to make a second run at imposing affiliate nexus rules on out-of-state vendors.
UPDATE, Aug. 31, 2010: Please see our most recent post concerning the status of the California Bill here.
UPDATE, Jul. 5, 2011: California has enacted a new nexus law.
Friday, May 21, 2010
Colorado Enacts Law on Gift Cards; Update on Other States’ Cash Redemption Rules
Amidst the hullaballoo over Colorado’s recently enacted affiliate nexus and out-of-state vendor reporting requirements and its recent economic nexus regulation, Colorado also passed a new law regarding gift cards.
Under the new law, signed by Governor Ritter on April 29, issuers of gift cards, including actual cards and electronic cards, must redeem the remaining value of a gift card for cash if there is $5 or less remaining on the card and the holder of the card so requests. Additionally, sellers may not sell gift cards which contain a service fee, dormancy fee, inactivity fee, maintenance fee, or any other type of fee. The new law does not apply to gift cards which are useable with multiple sellers, unless the multiple sellers are affiliated sellers. Violations of the new statute are deemed deceptive trade practices under Colorado law.
Other states have similar laws and/or pending legislation regarding cash refunds for low balances on gift cards and certificates:
California: Currently permits cash refunds for gift certificates with cash value less than $10. See Cal. Civ. Code § 1749.5(b)(2). California has legislation currently before its Senate that would raise the threshold amount to $20.
Maine: Requires cash refunds for gift and stored value cards with less than $5 remaining on request, except in the case of prepaid telephone cards, cards with an initial value of $5 or less, and cards that were not purchased but were provided as a promotion or as a refund where no receipt was provided. See Me. Rev. Stat. tit. 33, § 1953(1)(G).
Massachusetts: For gift certificates to which value may be added and which have been redeemed in part, the holder of the gift certificate may request the remaining balance be paid in cash once its value falls below $5. For gift certificates prohibiting the holder from adding additional value, the holder can request the balance be paid in cash once 90% of the face value has been redeemed. See Mass. Gen. Laws ch. 200A, § 5D.
Montana: Gift certificates with original values of greater than $5, with less than $5 remaining, must be redeemed for cash on request. See Mont. Code Ann. § 30-14-108(4).
Vermont: If the remaining value of a gift certificate is less than $1.00, the gift certificate is redeemable in cash for its remaining value on demand of the gift certificate’s holder. See Vt. Stat. Ann. tit. 8, § 2704.
Washington: If, after a purchase is made with a gift certificate, the remaining value is less than $5, the gift certificate must be redeemable in cash for its remaining value, on demand of the bearer. See Wash. Rev. Code § 19.240.020(3).
Under the new law, signed by Governor Ritter on April 29, issuers of gift cards, including actual cards and electronic cards, must redeem the remaining value of a gift card for cash if there is $5 or less remaining on the card and the holder of the card so requests. Additionally, sellers may not sell gift cards which contain a service fee, dormancy fee, inactivity fee, maintenance fee, or any other type of fee. The new law does not apply to gift cards which are useable with multiple sellers, unless the multiple sellers are affiliated sellers. Violations of the new statute are deemed deceptive trade practices under Colorado law.
Other states have similar laws and/or pending legislation regarding cash refunds for low balances on gift cards and certificates:
California: Currently permits cash refunds for gift certificates with cash value less than $10. See Cal. Civ. Code § 1749.5(b)(2). California has legislation currently before its Senate that would raise the threshold amount to $20.
Maine: Requires cash refunds for gift and stored value cards with less than $5 remaining on request, except in the case of prepaid telephone cards, cards with an initial value of $5 or less, and cards that were not purchased but were provided as a promotion or as a refund where no receipt was provided. See Me. Rev. Stat. tit. 33, § 1953(1)(G).
Massachusetts: For gift certificates to which value may be added and which have been redeemed in part, the holder of the gift certificate may request the remaining balance be paid in cash once its value falls below $5. For gift certificates prohibiting the holder from adding additional value, the holder can request the balance be paid in cash once 90% of the face value has been redeemed. See Mass. Gen. Laws ch. 200A, § 5D.
Montana: Gift certificates with original values of greater than $5, with less than $5 remaining, must be redeemed for cash on request. See Mont. Code Ann. § 30-14-108(4).
Vermont: If the remaining value of a gift certificate is less than $1.00, the gift certificate is redeemable in cash for its remaining value on demand of the gift certificate’s holder. See Vt. Stat. Ann. tit. 8, § 2704.
Washington: If, after a purchase is made with a gift certificate, the remaining value is less than $5, the gift certificate must be redeemable in cash for its remaining value, on demand of the bearer. See Wash. Rev. Code § 19.240.020(3).
Friday, May 14, 2010
California Nixes Affiliate Nexus Legislation; Connecticut’s Attempts Stall
Since our last update on the status of various legislative attempts to introduce Amazon-style affiliate nexus across the country, there have been a few important developments:
California
In the most current iteration of its bill, passed by the State Assembly on May 6, California scrapped proposed affiliate nexus and Colorado-style notice requirements (discussed here by us last month), and instead merely requires out-of-state retailers to provide notice on their websites and in their catalogues that California customers are required to remit use tax. In the bill analysis provided by the Assembly’s Revenue and Taxation Committee, the Committee rightly noted that under Quill, California is constitutionally prohibited from collecting sales tax from out-of-state retailers with no physical presence in the State. The Committee also noted that the bill provides no repercussions for non-compliant retailers. The bill is now before the State Senate.
Connecticut
In Connecticut, the last action taken on H.B. No. 5481, the proposed affiliate nexus legislation, was on April 13. The 2010 regular session of the State’s legislature adjourned on May 5 without holding any vote on the bill, and it appears that no affiliate nexus legislation will be enacted in the near future.
UPDATE, Aug. 31, 2010: Please see our most recent post concerning the status of this California Bill here.
UPDATE, Jul. 5, 2011: California has enacted a new nexus law.
California
In the most current iteration of its bill, passed by the State Assembly on May 6, California scrapped proposed affiliate nexus and Colorado-style notice requirements (discussed here by us last month), and instead merely requires out-of-state retailers to provide notice on their websites and in their catalogues that California customers are required to remit use tax. In the bill analysis provided by the Assembly’s Revenue and Taxation Committee, the Committee rightly noted that under Quill, California is constitutionally prohibited from collecting sales tax from out-of-state retailers with no physical presence in the State. The Committee also noted that the bill provides no repercussions for non-compliant retailers. The bill is now before the State Senate.
Connecticut
In Connecticut, the last action taken on H.B. No. 5481, the proposed affiliate nexus legislation, was on April 13. The 2010 regular session of the State’s legislature adjourned on May 5 without holding any vote on the bill, and it appears that no affiliate nexus legislation will be enacted in the near future.
UPDATE, Aug. 31, 2010: Please see our most recent post concerning the status of this California Bill here.
UPDATE, Jul. 5, 2011: California has enacted a new nexus law.
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