Arkansas Enacts "Amazon Law"

Thursday, April 14th, 2011


Arkansas has joined the ranks of the growing number of states that require many Internet-based retailers to collect sales tax on purchases shipped into their state. With the enactment of Senate Bill 738, Arkansas's "Amazon Law" statutorily expands nexus to reach many web-only retailers who lack a traditional physical presence in Arkansas.

It does so by creating two presumptions. First, an Internet-based seller that is affiliated (meaning it is part of the same controlled group of corporations) with a business that is subject to Arkansas's sales and use tax jurisdiction is presumed to be engaged in business in Arkansas, and is required to collect and remit Arkansas's sales tax. This is commonly known as "affiliate" nexus. Second, an Internet-based seller (without an affiliate in Arkansas) is presumed to be a retailer engaged in the selling tangible personal property in Arkansas if the seller enters into an agreement with an Arkansas resident (typically an Arkansas-based website) to provide referrals to the seller. Because these referrals can be generated by "clicking" on a website link to navigate to the seller's website, this is commonly referred to as "click-through" nexus.

To trigger this second presumption, two conditions must be met:

(1) Under the agreement, the Internet-based seller must pay the Arkansas resident a commission or some other consideration for referrals (whether by a link on an Internet website or otherwise) to the seller's website; and
(2) The seller's cumulative gross receipts from sales to purchasers in Arkansas generated by such referrals must exceed $10,000 during the preceding twelve months.

Colorado, Illinois, New York, North Carolina, and Rhode Island have all enacted similar "Amazon Laws."

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TTR has a website that companies subscribe to and use daily. This website provides a list of everything that can be bought or sold in the U.S. It provides simple answers to whether buying or selling these items is taxable (subject to a sales tax or other tax), and it provides all the legal authority to support these tax answers.

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