Presenting a live 110 ‐ minute teleconference with interactive Q&A Sales Tax Affiliate Nexus: Latest Developments Sales Tax Affiliate Nexus: Latest Developments Adjusting Multi ‐ State Compliance Under New State Laws for Online Business Partnerships THURS DAY, DECEMBER 15, 2011 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: Arthur Rosen Partner McDermott Will & Emery New Y Arthur Rosen, Partner, McDermott Will & Emery , New Y ork ork S hirley S icilian, General Counsel, Multistate Tax Commission , Washington, D.C. Annie Huang, Partner, Pillsbury Winthrop Shaw Pittman , S an Francisco Brian Toman, Partner, Reed Smith , S Brian Toman, Partner, Reed Smith , S an Francisco an Francisco For this program, attendees must listen to the audio over the telephone. Please refer to the instructions emailed to the registrant for the dial-in information. Attendees can still view the presentation slides online. If you have any questions, please contact Customer Service at1-800-926-7926 ext. 10 .
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S l Sales Tax Affiliate Nexus: Latest T Affili t N L t t Developments Seminar Dec. 15, 2011 S hirley S icilian, Multistate Tax Commission Annie Huang, Pillsbury Winthrop S haw Pittman ssicilian@mtc.gov annie.huang@pillsburylaw.com Arthur Rosen, McDermott Will & Emery Brian Toman, Reed S mith arosen@mwe.com btoman@reedsmith.com
Today’s Program Overview And Latest S O i A d L t t S tate Actions t t A ti S S lid 7 S lide 7 – S lid 20 lide 20 [S hirley S icilian and Annie Huang] S tate Attempts To Tax Remote Business: Background S lide 21 – S lide 25 [A [Annie Huang] i H ] Legal Issues S lide 26 – S lide 30 [Art hur Rosen and Brian Toman] S lide 31 – S lide 33 Political Implications [Art hur Rosen] Federal S ales And Use Tax Legislation S lide 34 – S lide 37 [Art hur Rosen and S hirley S icilian] S lide 38 – S lide 39 Practical Considerations [Brian Toman and Annie Huang]
Shirley Sicilian, Multistate Tax Commission Shi l Si ili M l i T C i i Annie Huang, Pillsbury Winthrop Shaw Pittman OVERVIEW AND LATEST STATE OVERVIEW AND LATEST STATE ACTIONS
I Introduction d i I I. Generally what states are attempting to do Generally what states are attempting to do A. General concept: Nexus based on agreements with “ affiliates” B. Pursuant to so-called “ click-through” nexus laws, state legislatures have attempted to exert taxing j urisdiction over l gi l t h tt t d t t t i g j i di ti certain out-of-state, Internet retailers based upon the retailer’s agreements with in-state residents to refer customers via a link to the retailer’s Web site to the retailer s Web site. C. This type of legislation typically provides that: (1) a remote seller has to register as a vendor and collect sales and use tax if the remote seller contracts with residents who link to the the remote seller contracts with residents who link to the remote seller’s Web page and are paid a commission; and (2) thereby generate over a threshold number of sales for the remote seller. remote seller. 8
Efforts To Address Quill A nd Role Of ‘Click ‐ Through’ Legislation A nd Role Of ‘Click Throu h’ Le islation Working to change Quill Working within g reality Quill reality Congress: Congress: Guidance: Define PP G id D fi PP in Internet Age • MS F A (H.R. 2701 – S S T) • MEA (H.R. 3179) • MF A (H.R. 1832) PP Yes: Collect • Affiliate entity nexus • “ Click-through” nexus Courts: Courts: • Oklahoma statute? PP No: Notice/report • Colorado statute? • General statute: CO, OK, S S C S C, S D VT D, VT • Ad-hoc: e.g ., NC 9
‘Click ‐ Through’ Nexus Overview ‘Click ‐ Through’ Nexus Overview Click Through Nexus Overview Click Through Nexus Overview Washington Montana Maine Minnesota North Dakota VT Oregon Vt Oregon N.H . Wisconsin . NH NH Mass. Idaho New York Michigan Michigan S S outh Dakota outh Dakota CT CT Wyoming Wyoming Michigan Michigan CT CT CT CT PA R.I. N.J Iowa Pennsylvania Nebraska . Nevada Ohio MD Illinois Utah Indiana Del. MD Colorado W. Va. California W. VA Virginia Kansas D.C. D C Kentucky Kentucky Missouri Missouri N. Carolina TN Arizona Oklahoma S . Carolina New Mexico Arkansas Legend Miss. Miss. Georgia Alabama Alabama N Nexus legislation passed l gi l ti d Texas Louisiana Florida Nexus without statute Hawaii Alaska Legislation under consideration Legislation considered but not passed or passed then * Vermont is only in effect if 15 other states enac. * V i l i ff if 15 h vetoed ** California’ s legislation is delayed until 2012, subj ect to passage of federal Other (incl. notification legislation. requirement) *** S outh Carolina has enacted a limited-notice requirement, and legislation is under consideration. 10
H How States Have Done It S H D I State Effective Date Affiliate Threshold Statute I I. S S tate statutes tate statutes Ark. Code Ann. § 26- Arkansas Oct. 24, 2011 More than $10,000 A. Enacted in NY , 52-117 Cal. Rev. & Tax. § California Jan. 1, 2013 if federal More than $10,000 and more CA, IL, CT , AR, legislation is enacted than $1,000,000 in annual in- 6203(c) by July 31, 2012. y y , state sales RI, NC and VT Sept. 15, 2012 if federal legislation is not enacted. II. Two approaches: ( ) (1) rebuttable Connecticut July 1, 2011 More than $2,000 Conn. Gen. Stat. § 12-407(a)(12)(L) 12-407(a)(12)(L) presumption; (2) Illinois July 1, 2011 More than $10,000 35 ILCS 105/2 and 110/2 irrebuttable N.Y. Tax Law § New York June 1, 2008 More than $10,000 1101(b)(8)(vi) presumption presumption North Aug. 7, 2009 More than $10,000 N.C. Gen. Stat. § 105- Carolina 164.8 A. All have sales Rhode Island July 1, 2009 More than $5,000 R.I. Gen. Laws § 44- thresholds 18-15 Vermont When adopted in 15 More than $10,000 Vt. Stat. Ann. tit. 32, § 9701(9)(I) (H.B. other states. 436) 11
S State Click ‐ Through Nexus Statutes Cli k Th h N S I. I New Y New Y ork ork A. Presumed a “ vendor” if the seller: (1) enters into an agreement with a New Y ork resident or residents for consideration, (2) the New Y , ( ) ork resident or residents link to the remote retailer’s Web page, and (3) the cumulative gross receipts from sales through the links to customers in New Y ork exceeds $10,000 B. B Presumption can be rebutted. P ti b b tt d 1. E.g., if the seller includes in its agreements a provision prohibiting associates from engaging in solicitation activities and each associate submits a signed activities, and each associate submits a signed certification stating the same. TS B-M-08(3)S (May 8, 2008) 12
S State Click ‐ Through Nexus Statutes (Cont.) Cli k h h S (C ) I I. Illinois Illinois A. Amends the definition of “ retailer maintaining a place of business” to specify that a business becomes a ‘‘ retailer maintaining a place of business’’ in Illinois and is maintaining a place of business in Illinois, and is therefore required to collect tax, when it contracts with a person located in Illinois to pay a commission in return for the person’s direct or indirect referral of customers p through a Web site link. B. Applies only when the retailer’s quarterly gross receipts from click-through referral sales through persons in Illinois exceed $10,000 in each of the previous four quarters $ C. No rebuttable presumption and no exception 13
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