New Jersey Adopts "Click-Through" Nexus

New Jersey Adopts "Click-Through" Nexus

On June 30, 2014, the New Jersey Legislature approved Assembly Bill 3486, establishing “click-through” nexus in the state. [See the text of the bill at 2014 N.J. ALS 13]. Under the new law, an out-of-state seller may be required to collect New Jersey state sales tax on sales of tangible personal property, specified digital products, or services where the seller has entered into an agreement with an in-state independent contractor or other representative under which the independent contractor or other representative refers customers to the seller via a website link or other method. [See N.J. Stat. § 54:32B-2, as amended by 2014 N.J. ALS 13].

 

The term “seller” for purposes of the New Jersey sales tax is defined in N.J. Stat. § 54:32B-2(i), and the statute states that the term includes: “A person who solicits business either by employees, independent contractors, agents or other representatives or by distribution of catalogs or other advertising matter and by reason thereof makes sales to persons within the State of tangible personal property, specified digital products or services, the use of which is taxed by this act.” [See 2014 N.J. ALS 13]. As amended by Assembly Bill 3486, N.J. Stat. § 54:32B-2(i) now creates a rebuttable presumption that a remote seller with such an agreement with an independent contractor or other representative in New Jersey has nexus with the state, and solicits business in New Jersey for purposes of the sales tax. [See “New Legislation 2014”, State of New Jersey Department of Revenue, http://www.state.nj.us/treasury/taxation/newlegislation2014.shtml].

 

The presumption can be rebutted with proof that the independent contractor did not engage in any solicitation in New Jersey on behalf of the seller “that would satisfy the nexus requirements of the United States Constitution. . .” during a time period specified in the statute. [N.J. Stat. § 54:32B-2(i)].

 

Assembly Bill 3486 adds the following paragraph to N.J. Stat. § 54:32B-2(i):

 

A person making sales of tangible personal property, specified digital products, or services taxable under the "Sales and Use Tax Act," P.L.1966, c.30 (C.54:32B-1 et seq.) shall be presumed to be soliciting business through an independent contractor or other representative if the person making sales enters into an agreement with an independent contractor having physical presence in this State or other representative having physical presence in this State, for a commission or other consideration, under which the independent contractor or representative directly or indirectly refers potential customers, whether by a link on an internet website or otherwise, and the cumulative gross receipts from sales to customers in this State who were referred by all independent contractors or representatives that have this type of an agreement with the person making sales are in excess of $ 10,000 during the preceding four quarterly periods ending on the last day of March, June, September, and December. This presumption may be rebutted by proof that the independent contractor or representative with whom the person making sales has an agreement did not engage in any solicitation in the State on behalf of the person that would satisfy the nexus requirements of the United States Constitution during the four quarterly periods in question. Nothing in this subparagraph shall be construed to narrow the scope of the terms independent contractor or other representative for purposes of any other provision of the "Sales and Use Tax Act," P.L.1966, c.30 (C.54:32B-1 et seq.). [2014 N.J. ALS 13].

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For more information on states’ nexus laws, please see in our bookstore the new publication, the Lexis State Tax Guide on Digital Content & Cloud Services, authored by Carolynn Iafrate Kranz.

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