One current area of reform in the state tax arena is the adoption of so-called “Amazon laws.” These laws require vendors to collect sales tax on certain internet transactions. This legislation typically asserts that sales/use tax nexus is created as a result of an agreement between an in-state business and an out-of-state online vendor, where the vendor compensates the in-state business for referring potential customers to the out-of-state vendor. This is typically done via a link on the in-state business’s website (referred to as “click-through” nexus).
Idaho has recently enacted House Bill (H.B.) 578 to assert nexus under these circumstances. Enacted on March 26, 2018, and effective July 1, 2018, H.B. 578 amends the definition of “retailer engaged in business in the state” for sales and use tax purposes in Idaho to include:
- Any retailer that has an agreement, directly or indirectly, with one or more persons engaged in business in this state which, for a commission or other consideration, the persons refer potential purchasers to the retailer directly, whether by a link on an internet website, written or oral presentation or otherwise.
- Instances when the cumulative gross receipts from sales by the retailer to purchasers who are referred by all retailers engaged in business in the state with such an agreement are greater than $10,000 during the immediately preceding 12 months.
“Gross receipts” means receipts from sales to customers located in Idaho who were referred to the retailer by persons in the state with such an agreement with the retailer.
A retailer meeting the requirements above is presumed to be maintaining a place of business in Idaho, but may rebut this presumption by submitting proof that the referrals or other activities pursued within the state were not sufficient to meet the nexus standards of the U.S. Constitution during the preceding 12-month period.
To learn more about how this affects your organization, contact Jeff or your trusted BKD advisor.