While it’s certainly not the first state to consider affiliate nexus legislation (since 2009, several states including: Colorado, Illinois, Rhode Island, North Carolina, Arkansas, New York, Connecticut, and California, have passed affiliate nexus—or “click-through”—laws), a bill was recently introduced in the Pennsylvania legislature that, if passed, would greatly expand the definition of nexus for sales and use tax purposes. That expanded definition would include those who solicit orders for products through links on a website, to members of a group conducting an “integrated business enterprise” so long as one member of that group has either a location in or is soliciting sales for taxable goods in Pennsylvania, and to certain affiliates—members of a “controlled group of corporations” with connections in and to Pennsylvania.
The introduction of these laws tend to follow a familiar pattern: Legislators throw a kitchen sink of sweeping changes into the first drafts—the aforementioned nexus-expanding provisions coupled with a host of other requirements (e.g. customer notice requirement and annual summaries to the DOR). As we recently saw in California, when enacted, the final versions of these click-through laws often reflect compromise and, in the case of some states, provision for an affiliate that solicits sales to rebut the presumption of nexus with the state.
What is particularly interesting about Pennsylvania is the possibility of an eventual showdown between Amazon and state lawmakers similar to—if not identical—to what transpired in California last summer. Earlier this year, Amazon announced plans to expand its operations in Pennsylvania’s Lehigh Valley so long as the state’s legislature agreed to back-off from introducing any new sales tax legislation. Amazon said that its plans included the hiring of several hundred full-time workers at an existing warehouse and shipping center that opened in 2010, as well as plans to open a new shipping center in Indiana, PA. And like in California, local officials in central Pennsylvania have publicly acknowledged that Amazon’s plans could boost the already staggering unemployment rates in these areas. However, Amazon’s threats to pull job-creating plans fell flat in California. So, what remains to be seen is whether Pennsylvania will call Amazon’s hand or, if Amazon and Pennsylvania’s Governor Corbett (R) will make a deal to prolong the effective date of any click-through legislation, if enacted—a la California—anticipating for a intervening federal solution on sales tax nexus.
My colleagues Michael Jacobs, Allie Carlson, and Kaitlin McKenzie-Fiumara have summarized the proposed Pennsylvania legislation here. Our earlier—and ongoing—coverage of developments regarding California’s affiliate nexus law and the continuing federal discussion may be found here.