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Sales & Use Tax Collection Burdens Multiply on Remote Sellers

The states as a whole estimate losing upwards of $12 billion in uncollected sales taxes annually from internet sales. Innovative taxing methods are being developed to impose tax collection burdens on out-of-state ("remote") sellers in such states as:

Colorado: Invoice notice requirement
A new Colorado law mandates retailers to include a notice on each invoice to Colorado customers informing the customer of its obligation to file a sales/use tax return and to remit tax accordingly. Retailers are subject to a $5 penalty for each invoice that fails to provide the required notice. A legal case may overturn it. In the interim, it may be prudent for retailers – even if they have no sales tax nexus – to consider adding a proper disclaimer to Colorado invoices allowing customers to make a business decision to be compliant.

Visit the Colorado Department of Revenue website for more details.

New York, Rhode Island & North Carolina: "Click-through" nexus (Amazon.com)
A New York law creates a "rebuttable presumption" that a seller is soliciting business in New York through an agreement with a resident of New York who refers customers through internet links. Under this provision, Amazon.com has conceded New York tax nexus based on in-state publishers that click-through on their websites to Amazon.com. In-state “representatives” can furnish documentation to rebut this presumption of agency status.

New York: Trademark/affiliate nexus
Having a New York affiliate (more than 5% common ownership) who is a sales tax vendor and who merely uses a trademark, service mark or trade name in New York that is the same as that used by the remote affiliate will trigger sales tax collection for the out of state affiliate. If common ownership exceeds 50% and a New York affiliate engages in activities in New York that benefit the remote affiliate (regardless of the trademark), it may trigger a sales tax collection duty for the remote affiliate. For example, an in-state parent company of an out of state 60% owned seller of taxable merchandise sold on a website could trigger a tax collection obligation on the remote affiliate.

Consult with EisnerAmper’s State and Local Tax Group to verify your obligations as a “remote seller”, configure invoices, properly limit agency relationships, consider withdrawal from some states, and otherwise immunize against potential sales tax liability.

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