There is still a lot of action when it comes to Internet sales tax legislation. Below  is a brief summary of the the status of some of the states I have been writing about. As you read over the list you will notice that there is a trend towards dropping separate legislation and adding it to a budget bill. While one reason for this is that it simplifies passage of a more balanced budget, it is also done when legislators run out of time to pass a bill. Making controversial bills a part of the budget  also  keeps  the legislation under the radar of constituents. Some parts of a budget will escape notice because other aspects of the budget are even more controversial.

While some states have great websites that we can use to watch proposed and pending legislation, many do not. Some states are still working on a way to make it possible to search pending bills.  Budget bills are typically even harder to keep an eye on, especially when states resort to last minute, late night sessions. Some even hold secret or closed sessions, releasing the proposed budget just hours before voting. Budget bills are also frequently lengthy, hundreds of pages long, making it easy to miss something.

In addition to the states listed below, dozens of states have either enacted or are considering enacting download taxes on digital products such as music, video and books,; this move is often seen as a precursor to an Internet tax. They are also talking about Internet tax legislation for next year.

What does all this mean for us? It means we all must work harder at keeping an eye on the actions of all states.

• California – California Internet tax part of pending budget – high alert
• Connecticut – back to committee for further study; ongoing budget talks
• Hawaii – Hawaii Internet tax legislation waits for Governor signing or veto. Takes effect July 1
• Maryland – did not pass committee; will be active again next session – high alert for next year
• Minnesota – was part of Senate/House budget which was broad vetoed by Governor; high alert for next year
• New York – New York Internet tax in effect since 2008 (June 2008)
• North Carolina – North Carolina Internet tax legislation part of pending budget
• Rhode Island – Rhode Island Internet tax legislation part of pending budget
• Tennessee – HB1947 and SB1741 in committee

Well, I was all set to write that the Minnesota Senate laid HF2323/SF2074 on the table when I received the following update. The Senate has declared action is urgent and the Omnibus Bill was taken off table. It has now received it’s second and third reading. By declaring it a matter of urgency the steps change slightly and the vote can happen quickly.

The Omnibus Bill will need to be monitored as the Minnesota version of the Internet tax is included. Article 3 Section 2 of SF2074 Substitute (HF2323 Article 10 Section 27) changes the definition of retailer to include solicitors. Under this provision, which closely mimics the NY Internet tax affiliates may create nexus. Although it may be rebutted with provisions that seem similar to the NY Internet tax it is my concern that many merchants will remove affiliates just as happened in NY.

Sec. 2. Minnesota Statutes 2008, section 297A.66, is amended by adding a subdivision to read:
Subd. 4a. Solicitor. (a) “Solicitor,” for purposes of subdivision 1, paragraph
(a), means a person, whether an independent contractor or other representative, who directly or indirectly solicits business for the retailer.
(b) A retailer is presumed to have a solicitor in this state if it enters into an agreement with a resident under which the resident, for a commission or other consideration, directly or indirectly refers potential customers, whether by a link on an Internet Web site, or otherwise, to the seller. This paragraph only applies if the total gross receipts from sales to customers located in the state who were referred to the retailer by all residents with this type of agreement with the retailer is at least $10,000 in the 12-month period ending on the last day of the most recent calendar quarter before the calendar quarter in which the sale is made.
(c) The presumption under paragraph (b) may be rebutted by proof that the resident with whom the seller has an agreement did not engage in any solicitation in the state on behalf of the retailer that would satisfy the nexus requirement of the United States Constitution during the 12-month period in question. Nothing in this section shall be construed to narrow the scope of the terms affiliate, agent, salesperson, canvasser, or other representative for purposes of subdivision 1, paragraph (a).
(d) For purposes of this paragraph, “resident” includes an individual who is a resident of this state, as defined in section 290.01, or a business that owns tangible
personal property located in this state or has one or more employees providing services for it in this state.

It is important for everyone to keep a close eye on this. I urge affiliates to be proactive and merchants if it does pass  to educate themselves as to the significance of the law before taking action.

Follow the Status of the Omnibus Bill in Minnesota

Today, Saturday April 25,  the House of Representatives voted to pass the Omnibus Tax Bill, HF2323. The vote was 68-65. This bill includes the Minnesota version of the Internet tax. The Omnibus Tax Bill will now move to the Senate. The proposed law closely mimics the NY Internet version with a similar threshold and the ability to rebut the presumption of nexus. Since it is a different state they might have different requirements on how to rebut but I would urge affiliates to begin to find counsel to see if the NY solution will work. At the very least, the documents and work done by our NY sales tax attorney will serve as a good starting point.

It is critical to be proactive. As we saw last year with NY, it is up to affiliates to push the issue. Although there is more attention on the issue this year, do not forget what happened to NY Affiliates last year. Think back to even a couple of weeks ago when Connecticut affiliates were removed from some programs before the law passed (it still hasn’t been signed).

 Affiliates are the ones with the most to lose but everyone stands to  lose if actions are taken without full understanding of the law.

Minnesota Omnibus Tax Bil HF2323

 Sec. 27. Minnesota Statutes 2008, section 297A.66, is amended by adding a subdivision to read:
Subd. 4a. Solicitor. (a) “Solicitor,” for purposes of subdivision 1, paragraph (a), means a person, whether an independent contractor or other representative, who directly or indirectly solicits business for the retailer.
(b) A retailer is presumed to have a solicitor in this state if it enters into an agreement with a resident under which the resident, for a commission or other consideration, directly or indirectly refers potential customers, whether by a link on an Internet Web site, or otherwise, to the seller. This paragraph only applies if the total gross receipts from sales to customers located in the state who were referred to the retailer by all residents with this type of agreement with the retailer is at least $10,000 in the 12-month period ending on the last day of the most recent calendar quarter before the calendar quarter in which the sale is made.
c) The presumption under paragraph (b) may be rebutted by proof that the resident with whom the seller has an agreement did not engage in any solicitation in the state on behalf of the retailer that would satisfy the nexus requirement of the United States Constitution during the 12-month period in question. Nothing in this section shall be construed to narrow the scope of the terms affiliate, agent, salesperson, canvasser, or other representative for purposes of subdivision 1, paragraph (a).
(d) For purposes of this paragraph, “resident” includes an individual who is a resident of this state, as defined in section 290.01, or a business that owns tangible personal property located in this state or has one or more employees providing services for it in this state.
EFFECTIVE DATE.This section is effective for sales and purchases made after June 30, 2009.

 

I will continue to follow as it now moves to Senate.

Status of HF 2323