In other news from Tennessee, on January 15, Tennessee introduced H.B. 1537 that, if enacted, would add click-through and affiliation provisions to the sales and use tax laws. Tennessee’s proposed legislation in all likelihood is in response to the lost sales tax revenue from Amazon.com. Amazon’s footprint in Tennessee is quite large with three large fulfillment centers in Tennessee.
Under the click-through provisions, a person is presumed to have click-through nexus if a person enters into an agreement with a resident of Tennessee, for consideration, directly or indirectly refers potential purchasers to the person. The referral can be via an internet link, internet website or other means.
The presumed nexus may be rebutted only by clear and convincing evidence that the Tennessee resident with the agreement did not conduct any activities that would substantially contribute to the person’s ability to establish and maintain a market.
Under the affiliate provision, substantial nexus to a person who does not have a place of business in Tennessee is established through the person’s affiliate’s maintenance, use, ownership or operation of any place of business having a presence in Tennessee. This presence must substantially contribute to the person’s ability to establish and maintain a market.
Unlike other proposed or affiliate statutes, this bill does not explicitly state what “factors” are considered in determining nexus. For example, in Hawaii’s proposed legislation, substantial nexus is determined by similar product lines or similar/substantially similar trade and service marks. Consequently, this language could result in aggressive enforcement measures by the state.
Stay tuned for updates as the bill progresses through Tennessee’s legislature.