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  1. #1
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    Are States Taking Action to Enforce Nexus Laws?
    In another discussion thread, a couple folks have asked whether any states have followed up, after enacting "advertising-nexus" laws, to try to enforce these laws against out-of-state merchants.

    In addition to news about Amazon's responses to tax agencies in many states, we've heard scattered reports from a few merchants who said they've received (what appear to be) form letters from state sales-tax agencies -- both from states with "advertising-nexus" tax laws and from states without them; for example, there's a report of a letter from the California State Board of Equalization in December 2010 (6 months before California enacted legislation).

    I've always assumed that state tax agencies would start with the Internet Retailer 500 or a similar list (and I'd actually expect them to do a bulk mailing without even checking if the retailer is already registered and collecting the tax). State agencies might also look for lists of retailers utilizing affiliate networks like LinkShare, CommissionJunction, Google Affiliate Network, or ShareASale, and might send these networks letters demanding information in a convenient format (company name, address, telephone); they might also use "affiliate directory" web sites.

    I'm not sure whether a state sales-tax agency might have access to income-tax information, such as 1099 filings or income-tax data reporting payments from an out-of-state merchant (or a network) to an in-state publisher; it would be especially useful if a state sales-tax agency could gather data from the IRS database of 1099 filings.

    I would also expect states to explore the possibility of hiring private companies to research and perhaps initiate contact with retailers; it's conceivable that some states might actually have a legal structure that would allow them to "pay based on performance," with private companies paid based on actual tax collections resulting from their efforts.

    Sales-tax enforcement is generally a low priority except for very large in-state retailers, and with state cuts to budgets and payrolls, I would actually expect very little "follow-through" on these laws, especially given the likelihood that these laws will eventually be stricken down by the courts as unconstitutional.

    My question: Apart from Amazon and the top 5 or 10 etailers whom we'd all expect states to focus on, have any other etailers been subjected to anything more than an informational form letter?

    A related question: Have any states sent demand letters to affiliate networks, requesting specific financial information about advertisers (tracked sales volume, amounts paid to publishers in a particular state, etc.)?
    Last edited by markwelch; July 18th, 2011 at 04:53 PM.

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  3. #2
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    It will probably be tough getting those questions answered. I assume most retailers are in no comment mode publicly until legal teams and accountants get done sorting out this mess.

    Bob

  4. #3
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    Quote Originally Posted by markwelch View Post
    I'm not sure whether a state sales-tax agency might have access to income-tax information, such as 1099 filings or income-tax data reporting payments from an out-of-state merchant (or a network) to an in-state publisher; it would be especially useful if a state sales-tax agency could gather data from the IRS database of 1099 filings.
    It is my understanding that states do not have access to this information..............but again who knows ..



    Sales-tax enforcement is generally a low priority except for very large in-state retailers, and with state cuts to budgets and payrolls, I would actually expect very little "follow-through" on these laws, especially given the likelihood that these laws will eventually be stricken down by the courts as unconstitutional.
    In North Carolina, the sales tax agency is the second most feared behind the Employment Security Commission.
    Last edited by I.M.O.G.; July 18th, 2011 at 06:06 PM. Reason: fixed missing "]"
    You must climb this mountain. There is no elevator. ---- Don't stick your finger in the liquid nitrogen.
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  5. #4
    ABW Ambassador JudiMoore's Avatar
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    I had one merchant tell me that AR was already calling their office. Merchant suggested that they must have bought the IR 500 list as a starting point. Wish I knew more about their enforcement steps. My State Rep is trying to fight it by requesting a study of enforcement costs vs new revenue.

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