Stay up to date with sales tax: Join our mailing list! has filed a lawsuit in New York Supreme Court, claiming that a recent New York statutory provision, which requires Internet retailers with no physical presence in the state to collect and pay sales and use tax on purchases made by New York residents, is unconstitutional. The provision presumes a retailer “solicits” business in New York if it compensates any in-state entity for directly or indirectly referring customers to the retailer. Under this statute, Overstock is presumed to “solicit”, due to its relationship with independently operated, New York-based Web sites that earn a commission by posting advertisements containing links to on their own sites. Overstock asserts that no solicitation actually exists and it does not have substantial nexus with the state and, therefore, seeks a declaratory judgment that the provision is invalid and unconstitutional. A similar lawsuit has been filed by

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(, Inc. v. New York Department of Taxation and Finance, New York Supreme Court, New York County, No. 107581/08)


A company may not have an office or any other connection to New York, however if an independent salesperson is making sales on their behalf the company qualifies for nexus. This is true even when the salesperson is only making a straight commission and does not have any other obligations with the company. (TSB-A-03(41)S, November 19, 2003.)


Nexus is not created if an out-of-state mail order company does not qualify for nexus itself and the related retail store does not perform any services for or represent the mail order company in any way. (New York Commissioner of Taxation and Finance, TSB-A-03(25)S, June 11, 2003.)


The opinion states that a mail-order company in no longer required to be registered or to collect New York sales and use tax if the following guidelines are met. The company must not have any type of offices, employees, or independent contractors working to solicit sales for the company. The only presence the company can have is through catalogs, other promotional materials, and website access. Delivery of items sold must be through common carrier or electronically via the Internet. Mail-order companies that fit the description above are allowed to surrender their Certificate of Authority and file their last sales and use tax return. (New York Commissioner of Taxation And Finance Advisory Opinion, TSB-A-02(19)S, Petition No. S010619A, June 26, 2002)



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