Taxing Tech

On May 27, Nevada enacted legislation (A.B. 380) that adds click-through and affiliate provisions to its sales and use tax laws.  Click-through nexus is effective October 1, 2015.  Affiliate nexus is effective three months earlier, on July 1, 2015.

Under the new click-through nexus law, an out-of-state retailer contracting with Nevada residents whose referrals result in more than $10,000 during the preceding four quarters is presumed to have nexus.

The retailer may rebut that presumption by proving to the Department of Taxation that each Nevada resident did not engage in in-state activity "sufficiently associated" with the retailer’s ability to establish or maintain a market in Nevada.  Such proof includes sworn written statements, but only if provided in good faith.

Under the new affiliate nexus law, an out-of-state retailer is presumed to have nexus if it is (1) part of a controlled group of corporations and (2) has a component member with a physical presence in Nevada, (3) which is not a common carrier acting as such.  Furthermore, the component member must conduct activities "significantly associated" with the retailer’s ability to establish and maintain a market in this state.  Those activities include, but are not limited to, (a) selling the retailer’s products; (b) maintaining real estate to facilitate the retailer’s deliveries; (c) using the retailer’s intellectual property; (d) performing deliveries or services for the retailer’s customers; or (e) allowing the retailer’s customers to pick up orders from the retailer on the component members’ premises.

Again, the retailer may rebut the presumption of affiliate nexus.  Whether such rebuttal may take the form of sworn written statements from the combined group’s other members was not addressed by the new law.

Finally, if either the Department of Taxation or Tax Commission makes a finding, ruling, or agreement to exempt a retailer from sales or use tax, it must report to the legislature within 30 days of the decision, when that retailer has physical or affiliate nexus.