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Texas vs Amazon

While some may be merely watching legislation, a far greater concern exists in the current nexus laws and definitions. More and more merchants have reported receiving not only nexus questionnaires but have received notice that based on in state activities of affiliates and others it has been determined that nexus was established and sales tax is due for a several year period.  As has been demonstrated, some merchants are  severing connections with affiliates to avoid nexus. Many more are taking advantage of state offered amnesty and begin collecting sales tax. Merchants deciding to collect and remit the sales tax is my preferred action but I can understand the other option.

As I have often stressed, it is critical that you obtain your own professional counsel to ensure you are in compliance with current legislation. A knowledgeable expert can determine your nexus status and your best course of action. (One of the resources I have listed on this site is Avalara.)

Texas is the latest state to show more aggressive route in collecting the sales and use tax that is owed. It is being reported that Amazon received notification of the assessment that they owe $269 million in back sales taxes and penalties for the period December 2005-December 2009. This figure will grow with the next audit period. Amazon has been reported to disagree with Texas revenue department and will contest the findings.

Affiliate Advocacy had identified Texas as a high risk state over one year ago. Hopefully at least a few merchants heeded our warning and took appropriate measures too ensure compliance.

Texas is not the only state taking this approach. Neither is Amazon the only merchant being audited, questioned and found to have nexus.

Do you know the nexus definition for every state you conduct business in? Is your lawyer or accountant familiar with the ways current nexus definitions can be interpreted?

The most important realization is that many states do not need to pass new legislation to determine that a nexus exists. Several states are using stricter interpretation of existing nexus laws.

Knowledge of current laws and nexus definitions has always been step one in being educated about nexus situation for affiliate and merchants. Unfortunately, it is most often missed.

{ 1 comment… add one }

  • Lokil October 28, 2010, 12:50 pm

    The Texas decision was not much based on the affiliate connection but more the fact that Amazon used a subsidiary Distribution Center in TX.

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