“Out Of State Seller Nexus” by Frank C. Carnahan
States continue to extend nexus to require sales and use tax collection due to concern with loss of tax revenues due to interstate transactions. Tax revenues have further decreased recently in the current economic decline. States are trying to extend nexus to include “economic exploitation” of a state’s economy without minimal physical contacts. For example, Amazon.com filed a 2008 lawsuit challenging the constitutionality of a recently enacted New York statutory provision requiring out-of-state Internet retailers with no physical presence in New York to collect New York sales and use taxes. The new statute presumes a retailer “solicits” business in New York if any in-state entity is directly or indirectly compensated for referring customers to the retailer, and Amazon compensates some independently operated, New Yorkbased Web sites that post advertisements with links to Amazon.
Missouri Letter Ruling No. LR5552,Missouri Department of Revenue, dated April 7, 2009, held that an out-of-state vendor (“Vendor”) selling tangible personal property to customers and resellers in Missouri established nexus requiring the vendor to collect Missouri use tax, and to obtain signed resale certificates from its resellers and not collect use tax on such sales. The ruling cites 12 CSR 10-114.100(2)(B) defining “physical presence”, including having agents, representatives, independent contractors, brokers or others that reside in, or regularly and systematically enter into, this state on behalf of the vendor.
The facts in the PLR include: Vendor operates a website selling products via mail-order, the Internet, telephone, or facsimile, and it delivers products to purchasers by mail or common carrier from out-of-state. Vendor does not send direct mailers to the public or advertise through television, radio, newspaper, or other media. Vendor’s customers can purchase the products for their own use, or to sell to others (“resellers”). Resellers receive discounts and other incentives, and there are no sales quotas and there are no restrictions on sales, recruiting activities, or territories. Vendor employs five regional managers based out-of-state who held three one-day seminars to educate on products, but not on sales techniques, and they made approximately nine visits to top sellers in Missouri in 2007. Vendor holds two conventions each year in different cities in the United States, but held no conventions in Missouri in the past ten years. Customers may return products to Seller within 90 days of purchase for a full refund, replacement, or credit, but may not return products to resellers.