For Immediate Release
January 26, 2004

Alabama – State Jumps on the Band Wagon, Adding Its Name to Internet Affiliate Nexus States

Alabama joins the growing list of states claiming sales and use tax nexus for “Click and Order” remote sellers with “Brick and Mortar” in-state affiliates.   

Arkansas, Minnesota, and Kansas have passed laws to this effect, with California and Michigan looking to do the same in 2004. 

AL H.B. 650, effective August 1, 2003, requires an out-of-state vendor to collect state and local use taxes if it is related to an in-state company and if the two entities:

• use identical or substantially similar names, trade names, trademarks or goodwill to develop, promote, or maintain sales;

• pay for each other’s services dependent upon the volume or value of sales;

• share a common business plan or substantially share their business plans;  or

• the in-state business provides services to the remote business connected with developing, promoting, or maintaining an in-state market.

Whether or not these standards will withstand constitutional scrutiny for substantial nexus requirements under the Commerce Clause remains to be seen.  No significant challenge has surfaced to date in any of the four states that have passed this kind of legislation.

While states will continue to look to affiliate nexus as a means to assert sales and use tax nexus, it is not a good medium for state income tax nexus, due to protection under PL 86-272 and the physical presence standard under the Commerce Clause.   

If you would like additional information on this topic or have any questions, please contact James Privett, Regional Vice President - Sales & Use Tax Group at (615) 373-8373 or 615 414-1682.  E-mail jprivett@thesaltgroup.com

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