Affiliate Nexus Tax Adopted By Three More States


Since May of 2013, Minnesota, Maine, and Missouri have each passed state legislation instituting an affiliate nexus tax on out-of-state retailers doing business inside their respective states, joining ten other states with already-existing affiliate nexus taxes.  The affiliate nexus tax laws represent the states’ efforts to circumvent the 1992 landmark Supreme Court ruling in Quill v. North Dakota, which held that states could only require out-of-state retailers to collect sales tax from local purchasers if the retailers had a physical presence inside that state.  This ruling has allowed major Internet retailers to market their products to purchasers across the nation while largely avoiding charging sales tax on any sales.

Though the state affiliate nexus tax laws are mostly similar, the specific details vary state by state.  Minnesota’s version of the tax calls for a presumption of nexus for any out-of-state seller with an agreement with a Minnesota resident that produces over $10,000 in a yearlong span.  Maine’s legislation creates a nexus between a seller and an affiliated person if the person has a substantial physical presence inside the state of Maine, and similarly to Minnesota, the nexus relationship must generate revenue exceeding $10,000.  Further, the legislation defines a seller as a person who “directly or indirectly refers potential customers, whether by a link on an Internet website, by telemarketing, by an in-person presentation or otherwise, to the seller.”  Lastly, Missouri’s legislation adds a presumption of nexus for retailers with “click-through” online advertising agreements with residents of Missouri.  Otherwise, the legislation is largely similar to that of Maine.

It is not surprising that these states have decided to adopt the affiliate nexus tax.  With Congress’ failure to pass the Marketplace Fairness Act, states have increasingly resorted to the affiliate nexus tax as a means to bypass Quill’s holding.  Until the Marketplace Fairness Act or similar federal legislation is passed, or perhaps if the Supreme Court considers a case arising from a state’s affiliate nexus tax, it will not be a surprise to see more states join the 13 states that have already adopted such a tax.

For more information regarding transaction tax matters affecting communications and VoIP services, please contact Allison D. Rule at or visit our Communications Taxes & Fees Practice page at

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