03.02.11

Several states are revising or considering the revision of their sales and use tax laws to expand the scope of taxable services and revise the base of taxpayers. Specifically, states are subjecting new transactions to sales and use tax and revising their sales and use tax nexus standards. The following is a list of important recent state and local tax developments.

Internet Hotel Bookings are now Subject to Sales and Use Tax in the District of Columbia

The District of Columbia recently approved permanent legislation that imposes sales and use tax on transient accommodations in the District purchased through Internet transactions and online travel companies. The sales and use tax will be imposed not only on the charges for the room itself, but also includes additional charges imposed by the online travel company for online booking.

Illinois Senate Bill Introduced that Would Eliminate “Click-Through Nexus” Provisions

A bill has been introduced in the Illinois Senate that would amend the Illinois Use Tax Act and the Service Use Tax Act by expanding the definition of doing business in the state and provide that a website link is insufficient to qualify as maintaining a place of business in Illinois. Specifically, the bill provides that the terms “retailer maintaining a place of business in this State” and “serviceman maintaining a place of business in this State” include a retailer or serviceman having any representative, salesperson, agent, canvasser, independent contractor, or solicitor operating in Illinois under the authority of the retailer or serviceman or its subsidiary for the purposes of selling, installing, delivering, assembling or taking orders for any tangible personal property. The bill also provides that an advertising link or affiliate marketing link on a website is not sufficient to qualify the retailer or serviceman as a retailer or serviceman maintaining a place of business in Illinois.

South Dakota Affiliate Nexus Bill Passes the Senate

The South Dakota Senate has passed a bill, without amendment, that would add affiliate nexus provisions to the state’s sales and use tax laws. The bill provides that a retailer is engaged in the business of selling tangible personal property, services, and products transferred electronically for use in South Dakota if the following two conditions exist: (1) the retailer holds a substantial ownership interest in, or is owned in whole or in substantial part by, a retailer maintaining a place of business within South Dakota and (2) the retailer sells the same or substantially similar line of products as the related retailer in South Dakota and does so under the same or substantially similar business name, or the instate facility or instate employee of the related retailer is used to promote, advertise, or facilitate sales by the retailer to a consumer. Alternatively, a retailer is also deemed to be engaged in the business of selling tangible personal property, services, and products transferred electronically for use in South Dakota if the retailer holds a substantial ownership interest in, or is owned in whole or in substantial part by, a business that maintains a distribution house, sales house, warehouse, or similar place of business in South Dakota that delivers property sold by the retailer to consumers. There is a rebuttable presumption that a retailer is engaged in business in South Dakota if that retailer is part of a controlled group (a statutorily defined term) that has a component member that is a retailer engaged in business in South Dakota. The bill is being sent to the House of Representatives for consideration.

If you would like to discuss how any of these updates affect you, please contact us.

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