Monday, June 21, 2010

California Reinserts Reporting Requirements; Tennessee’s Proposal to Expand Nexus Dies in Committee

We’ve been tracking developments in affiliate nexus legislation and attempts to impose Colorado-style reporting requirements on vendors in other states. Since our last updates (here and here), there have been further developments of note:


On May 14, we wrote that the California Assembly nixed proposed affiliate nexus legislation and Colorado-style reporting requirements before passing its bill onto the State’s Senate.  As in the Assembly’s version, the current iteration of the bill provides that retailers not required to collect use tax provide readily visible notice on their websites and catalogues that use tax is due from the purchaser.  Last week, however, the California Senate amended the bill to reinsert reporting requirements.

Under the amended bill, the “[State Board of Equalization] may require the filing of reports” by any person having possession or custody of information relating to sales of tangible personal property (“TPP”) subject to the tax. § 7055(a) (as proposed) (emphasis added). It is unclear to whom, exactly, this possible reporting requirement applies, but the reports “shall be filed when the board requires” and must include names and addresses of purchasers of TPP, the sales price of the TPP, the date of the sale and “such other information as the board may require.”

Additionally, the proposed subsections (b)(1) and (2) indicate mandatory reporting for vendors not registered to collect sales tax whose sales exceed a relatively modest threshold. The subsections require “every person that is not registered with the board” that sells TPP subject to use tax, to file quarterly reports including names, addresses, sales prices, the dates of sales, and “such other information as the board may require.” Subsection (b)(2) provides that the reporting requirement in (b)(1) does not apply to persons whose receipts are less than $100,000 in the prior year and who are reasonably expected to have receipts less than $100,000 in the current year.

It is unclear whether the Senate’s version will survive the legislative process.  If the amended bill is passed by the Senate, it must go back before the Assembly for agreement on the amendments. If the Assembly does not agree with the Senate’s amendments, it will be referred to a conference committee formed of members of both houses to resolve any differences.

We will continue tracking the progress of the bill to keep you informed of any new reporting requirements that may be imposed by the State. We also reiterate our previously-stated concerns: that the proposed bill imposes even more onerous reporting obligations than the Colorado statute, and that it may encourage other states to follow suit in attempts to regulate interstate commerce.


We last wrote about Tennessee in April, noting that the State’s affiliate nexus bill had been recommended for passage, but that the State’s Department of Revenue had indicated that it did not believe a mere affiliate relationship would be adequate for a finding of nexus.  The legislation has since died in committee, when the General Assembly adjourned on June 10. Only time will tell whether Tennessee intends to make a second run at imposing affiliate nexus rules on out-of-state vendors.

UPDATE, Aug. 31, 2010:  Please see our most recent post concerning the status of the California Bill here.

UPDATE, Jul. 5, 2011: California has enacted a new nexus law.

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