Publications
01.28.11
Recently Mississippi, New Mexico and Connecticut have introduced so called “Amazon laws” or “click through nexus bills.” Under these proposals, “nexus” or a connection to the state, could be established based on the activities of a company’s in-state affiliates even if the company has no presence on its own within the state. Currently some states require that a certain monetary threshold be met before nexus will be established, whereas other states such as Mississippi, do not propose to include a monetary threshold requirement for nexus to be met.
Mississippi
On January 4, 2011, House Bill 363, which has been referred to as a “click-through nexus” bill was introduced in the Mississippi House of Representatives. If enacted, the bill would require any person who makes a remote sale to a purchaser located in Mississippi to collect Mississippi sales or use tax if the person making the sale solicits or transacts business in Mississippi by employees, independent contractors, agents, or other representatives. This bill is similar to a previous bill that was introduced in the Mississippi Senate in 2010 but died in committee.
If passed, the bill would presume that a person is soliciting or transacting business in Mississippi if that person, through an independent contractor, agent, or other representative, enters into an agreement with a Mississippi resident under which the resident, for a commission or other consideration, directly or indirectly refers potential customers to the person making the sale. The referral by a Mississippi resident could even take place via the placing of a link on a website.
The solicitation or transacting business presumption may be rebutted by proof that the Mississippi resident did not engage in any solicitation in Mississippi on behalf of the person that would satisfy the nexus requirement of the U.S. Constitution. Unlike similar bills in other states, the Mississippi bill does not specify a threshold amount of gross receipts, proceeds, or sales by the seller that would be necessary to trigger the presumption.
A remote sale is defined as a sale of tangible personal property or specified digital products ordered by a purchaser in Mississippi from a person who receives the order outside the state and who ships the item to the purchaser in Mississippi or to another person in the state for whom the purchaser ordered the item. Every person engaged in making remote sales would be subject to Mississippi tax collection and tax administration requirements if this bill is enacted.
New Mexico
On January 13, 2011, Senate Bill 95, a “click-through nexus bill” was introduced in New Mexico regarding the presumption that certain Internet sales of goods and services are subject to the gross receipts tax. A person who has no physical presence in New Mexico would be presumed to engage in business and have nexus with the state if the person enters into an agreement with an affiliate, which is physically present in New Mexico for a commission or other consideration to direct or indirectly refer potential customers to that person. The referral would be either by a link on an Internet site or otherwise.
In addition, unlike some other states’ recent proposals, the presumption would be applicable only if the cumulative gross receipts from sales by the person to customers in New Mexico are in excess of $10,000 during the preceding 12-month period ending on June 30 of any year. The presumption of nexus may be rebutted by proof that the affiliate made no solicitation in the state that would satisfy the nexus requirements of the United States constitution on behalf of the person presumed to be engaging in business in New Mexico.
Connecticut
On January 20, 2011, House Bill 5545 was introduced in the Connecticut General Assembly and was referred to the Joint Committee on Finance, Revenue, and Bonding.
If enacted, the bill would amend a statute to provide that a retailer who has entered into an agreement with a state resident to refer customers to that retailer by means of a link on the resident's Internet website will be presumed to be soliciting business within Connecticut. As a result, the retailer would be liable for sales and use tax due on all purchases made from the retailer by state residents. According to the bill, the purpose of the legislation is to specify that sales and use tax is due from an online retailer when the retailer uses an in-state affiliate to sell its products.
Recent New Jersey Updates
New Jersey Moves to a Single Sales Factor
Recently, the New Jersey legislature passed a tax bill that phases in a single sales factor apportionment formula for corporation business tax purposes. The bill would replace New Jersey’s four factor (double weighted sales) apportionment formula. The bill still needs to be signed by New Jersey Governor Christie, but if signed, the phase-in would occur under the following schedule:
| Sales Fraction | Property Fraction | Payroll Fraction | |
| Existing law | 50% | 25% | 25% |
| Privilege periods ending on or after July 1, 2011 | 70% | 15% | 15% |
| Privilege periods ending on or after July 1, 2012 | 90% | 5% | 5% |
| Privilege periods ending on or after July 1, 2013 | 100% | 0% | 0% |
The bill also contains a modified sales factor formula for airlines that would replace the current method of determining the sales factor by taking a ratio of an airline’s departures in New Jersey. The new formula would be determined by the ratio of revenue miles in New Jersey divided by total revenue miles.
New Jersey Adopts Economic Nexus Presence Standard
New Jersey released a Technical Advisory Memorandum (“TAM”) on January 10, 2011 concerning its Corporation Business Tax (“CBT”) nexus policy update for foreign corporations. Using the “economic presence” standard, New Jersey may exercise its taxing authority over a foreign business that has no physical presence in the state. All corporations, including financial corporations (financial business corporations, banking corporations, credit card companies or similar businesses), that are domiciled and perform services exclusively from outside the state, will now be subject to the CBT in New Jersey if during any year they obtain or solicit business or derive receipts from sources within the state. New Jersey has asserted that this standard is coextensive with the minimum standards set forth in the United States Constitution and federal statutes. This change applies retroactively to privilege periods and taxable years beginning on or after January 1, 2002. The TAM also appears to be inconsistent with a 2009 New Jersey Tax Court ruling that refused to adopt the West Virginia MBNA case’s “significant economic presence test.”
While the TAM does not define when interest receipts are deemed to be “from sources within the state,” for financial business purposes, New Jersey’s typical practice has been to focus on the borrower’s commercial domicile and other factors, such as whether the loan is related to New Jersey activities or is secured by New Jersey collateral. Importantly, the “Alternative Minimum Assessment” will still apply to taxpayers who are immune from New Jersey income tax based on P.L. 86-272. It is important to recognize that the TAM is an informal guidance issued by New Jersey and does not have any enforcement power at this time. A regulation on this issue is expected to be issued by New Jersey in the near future.
Missouri Passes Small Business Deduction Bill
The Missouri House of Representatives has passed a bill providing an income tax deduction to small businesses (fewer than 50 employees) that create new full-time jobs (average of 36 hours per week for a 16-week period). The deduction amount would be $10,000 for each new full-time job created with an annual salary of at least the average annual county wage, or $20,000 per new full-time job created with an annual salary of at least the average annual county wage if the business offers health insurance for new employees and pays at least 50% of the premiums of all full-time employees who opt into the plan. The deduction would be available for tax years 2011 through 2014.
If you would like to discuss how any of these updates affect you, please contact us.
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