Alabama Retailers Should Cast a Wary Eye to the West

You could see it coming when New York, Rhode Island, and North Carolina enacted what are frequently referred to as Amazon.com affiliate nexus laws.  Once that bridge was crossed and the attack on the physical presence nexus standard withstood the initial taxpayer challenges, you knew it would happen.  When tax revenues plunged and debt skyrocketed for states across the union, you knew it was inevitable.  And now it is happening.

With the new year brings new legislative agendas and priorities and in statehouses throughout the country, revenue officials are desperately looking for every nickle and penny they can find.  As a result, several state legislatures have now introduced legislation that would enact Amazon.com affiliate nexus standards in their states.

The language of these Amazon.com affiliate nexus laws differ from state to state, but in essence, they provide that a person making sales of tangible personal property is presumed to be conducting business in the state if the seller contracts with a resident of the state who receives compensation for directly or indirectly refering potential customers to the seller by an Internet website link or otherwise.  The standards usually provide that for the law to apply, the cumulative gross proceeds from sales by the seller to customers in the state who are referred to the seller by that state's residents must exceed a certain dollar amount over a defined period of time.

This expansion of the Amazon.com nexus standard could be a particular concern for Alabama retailers as our neighbor to the west, Mississippi, is one of the states currently considering enacting such legislation.  If you are an Alabama retailer that does not collect Mississippi sales tax on sales into Mississippi, then you need to pay attention.  More specifically, if you are an Alabama retailer that is part of controlled group of corporations in a similar line of business or you are a remote retailer involved in "affiliate programs" and you do not collect sales tax on sales into Mississippi, then you need to pay attention.  The same would be true if you sell into any of the other states that have enacted these type nexus standards or that are currently considering them.

Other states currently considering enacting such laws or obtaining the same result by regulation (or that are considering reporting requirements similar to those recently enacted in Colorado) include Arizona, Hawaii, Illinois, New Mexico, California, Connecticut, Vermont, and South Dakota.