Yesterday, on behalf of an affiliate, I emailed the Rhode Island Sales Tax Revenue department. I was seeking clarification on how the presumption of nexus could be rebutted by a merchant. I used the example of a resident who owns a website that includes links to out of state merchants. I made it clear that the resident owning the website does not solicit in Rhode Island, they merely get natural traffic and made it clear that the bulk of sales generated through links on this site were to non Rhode Island residents.
The response I received today was that the existence of sales generated by Rhode Island residents to other Rhode Island residents mean there was solicitation, you cannot rebut the presumption.
… an e-commerce retailer that uses persons to act as its representatives in the state to solicit sales or to make and maintain a market in return for commissions, referral fees or other types of compensation is considered to be soliciting business within this state …
It seems that, at this time at least, you cannot rebut the presumption of nexus in Rhode Island if you have “affiliates” or outsourced program managers that reside in Rhode Island.
Remember that the second condition that must be met to establish a nexus is the sales threshold of $5,000
• The cumulative gross receipts from sales by the seller to customers in Rhode Island as a result of referrals to the seller by all of the seller’s resident representatives under the type of contract or agreement described above total more than $5,000 during the preceding four quarterly sales tax periods. (Sales tax quarterly periods end on the last day of March, June, September and December.
Of course, I am not a lawyer and you should consult a sales and use tax attorney for advice and guidance. I am merely sharing what I have learned.
Affiliates/publishers in Rhode Island will need to seek out merchants who collect and remit the sales tax. Rebuilding your business takes time but it is possible. There are lots of merchants who will or do collect the tax. Maybe it’s even time for your favorite Rhode Island brick and mortar store to add an affiliate program – refer them to your favorite network!