Under the recent New York budget act, a person who makes sales of tangible personal property or services (“seller”) is presumed to have nexus with New York for purposes of being required to register as a vendor and being required to collect New York sales tax if: i) one or more New York residents agree to directly or indirectly refer customers to seller for consideration, and ii) such agreements generate cumulative gross receipts from sales in New York by seller of more than $10,000 during the four preceding sales tax quarters.
A seller may rebut the presumption that it is soliciting sales in New York through a resident representative, by showing that the resident did not engage in any solicitation activities that would have caused seller to have nexus with New York during the four previous quarters. For example, the presumption will be deemed rebutted if the New York resident’s only activity on behalf of a seller is a link on the resident’s Web site to the seller’s Web site and none of the resident’s solicitation activity in New York is targeted at potential New York customers for seller. The inclusion of language in the agreement prohibiting solicitation in New York by the New York resident, however, is not sufficient by itself to rebut the presumption. The seller must also establish that the New York resident has complied with the prohibition.
Under the new rules, sellers with no physical nexus to New York may be required to collect New York sales tax. Several Internet sellers have challenged the constitutionality of this recently enacted New York nexus provision. We are following these cases closely. Their decisions will have great impact on certain Internet and other remote sellers’ obligations to collect New York sales tax.