On Friday, February 5, Tax Analysts sponsored a roundtable discussion on “State Taxes on Internet Sales: Are ‘Amazon’ Laws the Answer?” Four panelists headed the lively debate focused on whether click-through nexus laws or the Streamlined Sales and Use Tax Agreement provides the appropriate solution. Scott Peterson, Michael Mazerov, and Sutherlander Steve Kranz agreed that the Streamlined Sales and Use Tax Agreement was the better approach. George Isaacson disagreed, voicing concern over the lack of a one-rate-per-state requirement in the Agreement.
Of great significance during the debate was Michael Mazerov’s expressed view that click-through nexus laws could be constitutionally applied to companies who sell via television and telecommunication providers. In the context of interactive television sales, Mazerov stated that nexus is created with an out-of-state advertiser by the in-state presence of an unrelated video service provider – a concept Kranz referred to as “couch potato nexus.” Mazerov further opined that nexus with an out-of-state company might be created by an in-state, third-party telecommunications provider if the out-of-state company uses the telecommunications provider to generate phone call sales on a commission basis. Going further still, he said that nexus for an out-of-state retailer might be created by magazines and other publications, which offer mail-in postcard product ordering systems on a commission basis. In fact, Mazerov opined that when any in-state entity is compensated on a commission basis, nexus is likely created for the out-of-state retailer. It is safe to say that if a state were to adopt Mazerov’s couch potato nexus, telecom nexus or magazine nexus positions, the business community surely will challenge these aggressive nexus positions.