On October 31, Michigan reintroduced legislation that, if enacted, would add affiliate and click-through provisions to the sales and use tax laws. Michigan, who first considered affiliate nexus in 2011 and is among several states who are dusting off their previous failed attempts to take another crack at enacting affiliate nexus and click-through provisions.
Other states who have enacted similar affiliate nexus statutes require a vendor and another entity be related in some way or require that entity perform certain work that can be attributed to the vendor (thus causing the vendor to have nexus in a particular jurisdiction). However, Michigan’s proposed legislation would create nexus if a seller uses trademarks, service marks or trade names that are the same or substantially similar to those used by any other person that has substantial nexus with Michigan. Under this proposed legislation, a vendor that has no nexus under similar statutes may have nexus to Michigan if another person had a similar trademark. Even though each competitor has no legal relationship to the other, nexus would be impugned for the simple fact of similar trademarks.
Further, the legislation would create a rebuttable presumption that the activities of the other person were associated with the seller’s ability to maintain/establish a market in Michigan. Taxpayers would bear the burden of showing that the activities were not substantially associated.
Stayed tuned for updates as this bill moves through Michigan’s legislature.