Tax & Accounting Blog

Louisiana Latest State to Enact Click-Through Nexus

Blog, Indirect Tax, ONESOURCE, Sales and Use Tax April 12, 2016

Just this month, Louisiana became one of the latest states to enact click-through nexus. Click-through nexus laws, otherwise commonly known as Amazon laws,  allow states to require out-of-state retailers to collect sales and use taxes on sales to their state’s residents.

On March 14, 2016, Governor Edwards signed Act 22 into law, which became effective immediately.  The law expands the definition of what it means to be a dealer engaged in business in the state; in other words, it expands the scope of which businesses must collect sales and use tax.   The definition now includes the following:

The solicitation of business through an independent contractor or any other representative pursuant to an agreement with a Louisiana resident or business under which the resident or business, for consideration of any kind, directly or indirectly, refers potential customers, whether by link on an internet website, an in-person oral presentation, telemarketing, or otherwise to the seller.

This means that an online retailer who gives a Louisiana resident or business a referral fee or discount in exchange for linking to the retailer’s website on the business or resident’s website may now be required to collect tax on sales to Louisiana customers.

The Act also enacts so-called “affiliate nexus.” Affiliate nexus allows states to require out of state retailers to collect tax on sales to customers in the state if the retailer has an affiliated agent who sells the same or similar products under the same or similar name.

Although numerous states have enacted similar nexus laws, click-through nexus and affiliate nexus laws remain controversial.  Opponents of these laws argue that the laws are unconstitutional due to unduly burdening interstate commerce and fly in the face of the physical presence test set by the U.S. Supreme Court case Quill Corp. v. North Dakota. 504 U.S. 298 (1992).  On the other hand, proponents of the law argue that, without these laws, in-state brick-and-mortar shops are put at a disadvantage over out-of-state retailers to whom customers do not pay tax.