Connecticut is inching forward in their efforts to require out of state merchants to collect sales tax for online sales. HB 5481, the Connecticut Internet sales tax bill, has received a favorable report and has moved out of the Legislative Commissioner’s Office. It has been assigned a House Calendar Number (301) and it is File Number 497. The next step is now a vote of the House of Representatives. If it passes, it will then move to the Senate.
As you may recall, this bill is similar to other Internet sales tax but has a lower threshold of $2,000 in sales (from Connecticut affiliates/publishers to Connecticut residents. If it passes the House and Senate, it will take effect July 1, 2010. According to the bill and the analysis, the presumption of nexus may be rebutted.
Excerpt from the OLR Bill Analysis for HB 5481
This bill presumes a company is a retailer with sales tax nexus in the state if it annually sells more than $ 2,000 worth of taxable items or services in Connecticut through certain agreements with Connecticut residents. The agreements must provide that, in return for the resident referring potential customers to the company, he or she will receive a commission or other compensation from that company. Under the bill, the referrals can be direct or indirect and can be made by any means, including a link on an Internet website. By extending Connecticut sales tax nexus to companies that have such agreements, the bill requires them to collect Connecticut sales tax on all their taxable sales in Connecticut, not just on items sold through the referrals.
The bill applies to any company that annually earned more than $ 2,000 in gross revenue from sales in the state under such referral agreements in the preceding four quarters ending on the last days of March, June, September, and December. It establishes a presumption that such a company is soliciting business in Connecticut through the independent contractors or representatives. The company can rebut the presumption by proving that the resident with whom it has an agreement did not solicit business in Connecticut in a manner that would satisfy the federal constitutional nexus requirement (see BACKGROUND).
Affiliates should continue to prepare their business should merchants decide to terminate relationships. Identify replacement merchants for all at risk relationships. Merchants should also explore alternate solutions including collecting and remitting the sales tax. There are several companies that can facilitate the process.
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It has been assigned a calendar spot and is screening Monday. We had a wonderful meeting with two Senators and a House Rep yesterday. It went very well and I feel that they finally understand our argument against this bill. Its very important for affiliates in CT to join the fight. Please contact me at cjedrziewski@freeshipping.com or the PMA or leave your information here and someone will get back to you.
This is too important and getting too close to the wire to remain silent.
Connecticut is the most heavily taxed state, and elects a Governor that says in his campaign that he is going to increase taxes rather than make spending cuts, and he gets elected. Only in CT.
CT leads the country in job losses and lack of new jobs being created. New companies will not come to CT, and existing companies move to other states that are business friendly. The result is that fewer and fewer employed people in CT are paying higher and higher taxes. It’s time to move!