Online Retailers Beware: States Broaden the Tax Net
New York was the first state to adopt such “affiliate nexus” legislation, doing so in 2008. The New York law provides that an online retailer that makes sales of taxable property or services in New York will be presumed to be vendors required to collect sales tax if it enters into an agreement with a New York resident under which a commission or other consideration is paid for directly or indirectly referring potential customers to the seller’s website. Exceptions to the new “affiliate nexus” standard apply if the party providing the link to the seller’s website doesn't engage in any solicitation activities on behalf of the online retailer, or if the gross receipts as a result of referrals by all of the seller’s representatives don't exceed $10,000 in the previous four quarters.