On March 2, an Internet-affiliate nexus bill was introduced in the Arkansas State Senate (SB 738). Arkansas joins Arizona, California, Connecticut, Hawaii, Illinois, Massachusetts, Minnesota, Mississippi, New Mexico, Tennessee, Texas, and Vermont, as the thirteenth state this legislative season to consider such a measure. Nearly all of the bills -- with the exception of Illinois’s HB 3659, which was passed by the Illinois legislature and is now awaiting signature or veto by Governor Quinn, and Connecticut’s SB 5545 -- are patterned directly upon the New York affiliate nexus law enacted in 2008 and challenged in court, so far unsuccessfully, by Amazon.com. In other words, 11 of the 13 proposed laws create a rebuttable presumption that an out-of-state Internet retailer is obligated to collect and remit the state’s sales and use taxes if the retailer enters into an agreement with an in-state resident (an “affiliate”) pursuant to which the affiliate places a link from the affiliate’s website to the retailer’s site, and the retailer realizes at least $10,000 in sales to customers referred to it by the affiliate’s links. The presumption can be negated by proof that the in-state affiliates did not engage in any in-state solicitation on behalf of the retailer.
In its November 2010 ruling, the Appellate Division of the New York Supreme Court found that the ability of a retailer to rebut the presumption of solicitation was an important factor in determining that the New York law is not unconstitutional on its face. The Court, however, remanded the case for further proceedings on the issue of whether the law violates the Commerce Clause and Due Process Clause as applied to specifically to Amazon. As the ongoing proceedings in the New York case make clear, the constitutionality of such “New York-style” affiliate-nexus legislation is far from resolved.
At the same time, it is worth noting that the Illinois and Connecticut bills differ from the New York law in that neither bill provides that the presumption that a retailer must collect sales and use tax as a result of having in-state Internet affiliates may be rebutted. Imposing an irrebuttable presumption of nexus is highly suspect under both the Commerce Clause and Due Process Clause. Without a rebuttable presumption in place to protect retailers, Illinois and Connecticut would subject Internet retailers to burdensome state tax collection obligations when the retailers are effectively doing nothing more than advertising. For that reason, the progress of each of these bills bears watching. Stay tuned.
Showing posts with label New Mexico. Show all posts
Showing posts with label New Mexico. Show all posts
Monday, March 7, 2011
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.
Friday, April 30, 2010
Update: Status of 2010 Affiliate Nexus Legislation
As we reported on March 9, New York-style “Amazon” affiliate nexus legislation was introduced in the 2010 legislative sessions of multiple states. Even as the North Carolina Department of Revenue has introduced a program intended to entice retailers to register for sales and use tax purposes under its existing affiliate nexus statute (see our recent post for further discussion of the issue), other states are moving closer to adopting similar laws. At the same time, affiliate nexus legislation has died, for this legislative season at least, in several states. Here’s an update with regard to such legislation in a number of states:
Moving Forward:
Dead (it appears) for 2010:
Moving Forward:
- Connecticut: Bill favorably reported out of committee with recommendation that it “ought to pass”
- Minnesota: Committee hearing on bill scheduled for April 20
- Tennessee: Bill recommended for passage by Tax Subcommittee of Ways & Means, but Tennessee Department of Revenue has indicated that it does not believe mere affiliate relationship would be adequate for nexus
- California: Last action (re-referral to Committee on Appropriations) was April 28, 2010
- Illinois: Last action (referral) was March 19, 2010
Dead (it appears) for 2010:
- Iowa: General Assembly adjourned without acting on the bill
- Maryland: General Assembly adjourned without the bill getting out of committee
- Mississippi: Bill died in committee
- New Mexico: Bill tabled
- Vermont: Ways and Means Committee voted not to include affiliate nexus measure in tax legislation
- Virginia: Affiliate nexus legislation tabled in committee
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