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Amazon Acts Over Vermont's 'Click-Through' Sales Tax

by Leroy Baker, Tax-News.com, New York

12 January 2015


In what is being seen as a reaction to Vermont's online sales tax legislation, Amazon has added the state to the list of states in which it will not operate its United States associates advertising program.

Under current court rulings, retailers are only required to collect sales tax in states where they also have bricks-and-mortar stores – the "physical nexus." A general federal solution, such as the Marketplace Fairness Act (MFA), which would require all online retailers with national annual sales greater than USD1m to collect sales tax for state and local governments, even though they lack a physical presence in the state, remains blocked in Congress.

However, many states have already responded by introducing their own online sales tax laws, including those that have attempted to expand the meaning of a seller's physical nexus to include its affiliate businesses (that attract buyers by a link to the retailers' websites in exchange for a commission out of each sale) – the so-called "click-through" nexus.

While Amazon has been increasing the number of states in which it does agree to collect tax revenue, particularly where it is building new warehouses, it has also been fighting the imposition of the tax on its online sales in many states, particularly those where it does not have such a physical presence.

Its program operating agreement for its associates now reads that, "if at any time following your enrollment in the Program, you become a resident of Arkansas, Colorado, Maine, Missouri, Rhode Island or Vermont, you will become ineligible to participate in the Program, and this Operating Agreement will automatically terminate, on the date you establish residency in that state."

In reply, Vermont Tax Commissioner Mary Peterson pointed that the state's additional legislation was passed in 2011 and, while it would tax Vermont residents on "click-through" sales, it is only due to come into effect after the state attorney general's office determines that one-third of states with sales tax have adopted similar laws.

Peterson claimed that Vermont's law "was passed in order to put pressure on Congress to enact the MFA," and that, while "Amazon has severed advertising contracts in states with click through laws, … in Vermont's case, [it has] acted even before our click-through law took effect."

She also pointed out that Vermont's governor "will be asking the legislature to amend our click through law to take effect one year after twenty-five states adopt similar laws."

TAGS: court | compliance | tax | business | sales tax | commerce | law | internet | e-commerce | legislation | United States | retail | Tax

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