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With Gov. Jerry Brown’s signature on June 28, California has now enacted a click-through nexuslaw. As it has done elsewhere, Amazon did not lose any time in terminating its affiliate programs in the state.

Meanwhile, the Texas Legislature has sent back to Gov. Perry the affiliate-nexus legislation he vetoed on May 31. This time the legislation is part of the budget bill passed in special session. Whether or not that will affect how the governor responds will be seen.


As Sandy Weiner, CCH State Income Tax Writer/Analyst, has reported, the North Carolina General Assembly overrode Gov. Bev Perdue's veto and enacted a budget bill that adopts federal adjusted gross income rather than federal taxable income as the starting point for computing North Carolina personal income tax, enacts a new net business income tax deduction, and retroactively modifies the capital stock base for purposes of determining a taxpayer's corporate franchise tax liability (see H.B. 200 , Laws 2011). The new starting point and deduction are effective beginning with the 2012 tax year. Notably absent from the bill is the extension of the temporary income tax surcharge and the temporary increase in the sales and use tax rates that were enacted in 2009.


The new personal income tax net business income tax deduction is equal to the first $50,000 of net business income minus any passive income the taxpayer receives during the taxable year. By adopting federal adjusted gross income as the starting point, North Carolina no longer incorporates the federal standard deduction or personal exemption amounts and, therefore, no longer requires the corresponding North Carolina adjustments beginning with the 2010 tax year. The standard deduction amount will be set as follows depending on the taxpayer's filing status:

 · Married, filing jointly --$6,000

 · Head of Household --$4,400

 · Single --$3,000

 · Married, filing separately --$3,000

The personal exemption amount will be $2,500 for taxpayers with incomes up to the following limits:

· $100,000 for taxpayers filing married, filing jointly

· $80,000 for taxpayers filing as heads of household

· $60,000 for single taxpayers

· $50,000 for taxpayers filing married, filing separately


The personal exemption for taxpayers with incomes above these thresholds will equal $2,000.


Reserves for amortization of intangible assets as permitted for income tax purposes are deducted from the capital stock base for purposes of determining a taxpayer's corporate franchise tax liability, effective retroactively to post-2006 tax years. Previously, the statute only authorized the deduction of reserves for depreciation of tangible assets in the capital stock base.


Looks like Amazon will have its distribution facility in South Carolina after all, as Gov. Nikki Haley has allowed

S.B. 36 to become law without her signature. The bill gives a five-year nexus safe harbor for sales and use tax purposes in exchange for the Internet retail giant building and operating a distribution facility near Cayce in Lexington County. The provisions are a little different from the provisions inH.B. 3488 (discussed in a [previous post |]) 

Specifically, S.B. 36 provides that "owning, leasing, or utilizing a distribution facility, including a distribution facility of a third party or an affiliate, within South Carolina is not considered in determining whether the person has a physical presence in South Carolina sufficient to establish nexus with South Carolina for sales and use tax purposes." To qualify for the safe harbor, Amazon, or any other distribution facility that wants to take advantage of the safe harbor, will have to:


· place the distribution facility in service after December 31, 2010, and before January 1, 2013;


· make, or cause to be made through a third party, a capital investment of at least $125 million after December 31, 2010, and before December 31, 2013;


· create at least 2,000 full-time jobs, including a comprehensive health plan for those employees, after December 31, 2010, and before December 31, 2013; and


· after meeting the initial job requirements, maintain at least 1,500 full-time jobs until January 1, 2016.


Amazon (and other retailers that qualify for the safe harbor) will have to notify purchasers in a confirmation email that they may owe South Carolina use tax. The emails must include a link to the South Carolina Department of Revenue website. Also, by February 1 of every year, the qualifying retailer has to notify South Carolina purchasers with a statement of the total sales made to the purchaser during the preceding calendar year.


According to The State, Amazon's distribution center is expected to open in this fall. The State also reports that the loss in tax revenues from the exemption is initially estimated at $2.5 million yearly and that supporters say the center will generate at least $11 million annually in payroll and property taxes.




Sharing the same trade name, logo, and parent company with a brick and mortar retailer was not enough to establish an online retailer's nexus with New Mexico. The New Mexico Taxation and Revenue Department ruled in an administrative decision that the activities and contacts between an online bookseller, LLC, and Barnes & Noble Booksellers, Inc. (Booksellers), a brick and mortar retailer with stores in New Mexico, did not result in the online bookseller having a substantial nexus with the state under Quill Corp. v. North Dakota, 504 U.S. 298 (1992). In reaching its decision, the department examined (1) the close corporate relationship and common ownership of and Booksellers; (2) cross marketing of the two retailers, including through use of common trademarks and logos; (3) Booksellers' book return policy; (4) participation in a multi-retailer gift card program; (5) participation in a customer loyalty program; (6) the sharing of email addresses through a reader's advantage card program; and (7) a system through which Booksellers'  local stores ordered books from for shipment to customers.

The department's decision noted that, of all the activities of Booksellers, the loyalty program, which was administered out of Booksellers stores in New Mexico, "is the activity that gives pause and thoughtful consideration." Although the loyalty program clearly provided some economic incentive to, the online retailer did not receive any compensation from the loyalty program that was not related to its own Internet sales. Also, there was no exclusive or special agency relationship that established and maintained a market. Since's compensation was tied to its own Internet sales, rather than Bookseller's sales, the loyalty program did not establish substantial nexus for the online retailer with New Mexico.    

The revenue department failed to prove that Booksellers created and maintained a market for Rather, none of the brick and mortar retailer's activities or connections provided the online retailer with an exclusive retail advantage or economic advantage. Although the companies used the same trade name and logo, and provided a store locator within's website, these activities were not sufficient to show that active cross marketing occurred, or that Booksellers created a joint marketing strategy or advertised the's services at its retail stores in New Mexico.




States apparently have still not lost the taste for the various flavors of “Amazon” legislation on offer throughout the nation.


Vermont legislation discussed in a previous posthas been enacted. Non-collecting retailers and online auction websites now must notify customers that their purchases may be subject to use tax in Vermont. This notice requirement will be automatically repealed once 15 states have adopted click-through nexusprovisions, at which point Vermont’s own click-through nexus law kicks in. Gov. Peter Shumlin also signed separate legislation requiring the state to set up a website to provide “matchmaking” opportunities for Vermont companies to affiliate with online retailers that collect and remit sales tax on purchases made online.

Texas Gov. Rick Perry vetoed legislation on May 31 that would have extended sales tax nexus to remote sellers with affiliates engaged in specified activities in the state. He called for further policy discussions with stakeholders. The bill, however, may be brought back up in the Legislature’s special session.

The California Assembly has passed separate nexus bills. One would enact a version of click-through nexus. The other would impose nexus on a retailer with an affiliate in California that solicits sales for the retailer, or that performs design or development services for property sold by the retailer. Both bills are now awaiting action in the California Senate.

Louisiana recently joined the club of states considering remote-seller nexus legislation. A bill that would enact click-through nexus and affiliate nexus provisions was introduced in the Louisiana House of Representatives on May 24.

Meanwhile, the Minnesota Legislature adjourned its regular session without passing the click-through nexus legislation that was pending there.


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