Internet Sales Tax and Advertising Tax
Internet Sales Tax laws and legislation, also known as Advertising tax laws, are one of the critical issues facing our industry. As shopping habits have changed, many states are seeking to have merchants collect and remit sales tax on a broader basis. Legislators are considering new nexus laws as being a modernization of sales tax laws. Currently three states have active modern sales tax laws that affect the online marketing industry. Many more states are poised to enact new, more modern nexus laws. In addition, others are evaluating enforcing current laws or changing their interpretation of existing laws. Along with a push for the Streamlined Sales Tax Agreement this movement can have a tremendous impact on our entire industry.
The information presented here is only meant to be a starting point, please consult a sales and use tax attorney and your accountant for advice and guidance.
Voicing Opinion on Legislation
It is important that legislators know how you feel about their proposed Internet sales tax legislation and proposed nexus laws. To assist you in writing a letter, please take a moment to review our guidelines on how to write a legislator.
How to Write Your Legislators Regarding a Bill (Plus sample letter)
These are some definitions you may find helpful in trying to understand Internet sales tax issues.
Nexus - with regards to business it is a physical presence in a state. What creates a nexus in a state differs from state to state. Nexus can exist if there are stores, offices, warehouses, sales staff, representatives, solicitors or others.Out of state merchant – a merchant who does not have a physical store, warehouse or office in a state is considered to be an out of state merchant.Remote seller – out of state merchantSales and Use Tax – states with sales tax actually have what is called sales and use tax. When tax is collected from a customer at time of purchase by merchant it is called a sales tax. Merchant than remits it to the state where sale occurred. If a merchant does not collect and remit the sales tax, the customer must pay it direct to the state – this is a use tax.States with Internet Sales Tax, States with Affiliate Tax or Advertising Tax
Some states with recent nexus legislation.
New York (June 2008) – sales threshold is $10,000 in sales from all NY affiliates to NY residents in the previous 4 quarters; presumption of nexus may be rebutted with NY 2 Step Solution (non solicitation clause, yearly affidavit) Consult a sales and use tax attorney and your accountant for advice and guidance.
North Carolina (July 2009)- sales threshold is $10,000 in sales from all NC affiliates to NC residents in previous 4 quarters; currently it is unknown if there is ability to rebut the presumption of nexus. Consult a sales and use tax attorney and your accountant for advice and guidance.
Rhode Island (July 2009)- sales threshold is $5,000 in sales from all RI affiliates to RI residents in previous 4 quarters; currently we have been informed there is no ability to rebut presumption of nexus. Consult a sales and use tax attorney and your accountant for advice and guidance. Please see our State Information and Resources.
Follow Legislation in Your State
Although we closely monitor pending legislation and action in all states we urge you to do the same. Be sure your accountant is informed and up to date on all regulations (in all states) that affect you.
Please visit NY Affiliate Voice for detailed information. Since May 2008 NY Affiliate Voice has provided the industry with information on Internet sales tax issues for all states. Other critical industry issues are also covered.