Maryland has caught the Internet tax bug. They are one of the latest states to consider enacting legislation that would require out of state merchants to remit sales tax. The legislation Maryland SB1071 is very similar to the NY Internet Tax. They propose a $10,000 sales threshold and indicate a nexus is rebuttable if there has been no solicitation. If the legislation passes, merchants and Maryland Affiliates should examine the possibility of the NY solution working.
(1) THE SELLER ENTERS INTO AN AGREEMENT WITH A RESIDENT OF THE STATE UNDER WHICH THE RESIDENT, FOR A COMMISSION OR OTHER CONSIDERATION, DIRECTLY OR INDIRECTLY REFERS POTENTIAL CUSTOMERS TO THE SELLER, WHETHER BY A LINK ON AN INTERNET WEBSITE OR
(2) THE CUMULATIVE GROSS RECEIPTS FROM SALES BY THE SELLER TO CUSTOMERS IN THE STATE WHO ARE REFERRED TO THE SELLER BY ALL RESIDENTS HAVING AN AGREEMENT WITH THE SELLER AS DESCRIBED IN ITEM (1) OF THIS SUBSECTION IS GREATER THAN $10,000 DURING THE PRECEDING FOUR QUARTERLY PERIODS ENDING ON THE LAST DAY OF FEBRUARY,MAY, AUGUST, AND NOVEMBER.
(C) THE PRESUMPTION UNDER THIS SECTION MAY BE REBUTTED BY PROOF THAT THE RESIDENT WITH WHOM THE SELLER HAS AN AGREEMENT AS DESCRIBED IN SUBSECTION (B)(1) OF THIS SECTION DID NOT ENGAGE IN ANY SOLICITATION IN THE STATE ON BEHALF OF THE SELLER THAT WOULD SATISFY THE NEXUS REQUIREMENT OF THE UNITED STATES CONSTITUTION DURING THE FOUR QUARTERLY PERIODS IN QUESTION.
The first steps should the legislation pass, is to retain the services of a Maryland Sales Tax Attorney. The attorney must be knowledgeable in Internet sales and marketing or willing to learn. Once you retain their services, arrange for a sit down meeting. If possible it would be best to have a few affiliates, merchants and an affiliate program manager attend this meeting. This will help ensure that questions from each of these groups get answered. If a group of individuals all contribute the fee should be manageable. In addition, you can also submit specific questions to the Maryland Tax Revenue Department. My opinion is that the sales tax attorney is the most critical step. Have the attorney review the documents used in NY. Although each state is different, the documents will be a good starting point. The NY documents were created using the TSB memos of NY.
While I took time off to battle pneumonia, others were keeping an eye on Maryland and fighting AB178 in California. There are many additional sites addressing the Maryland and California legislation- including: