Alabama Adopts Nexus Rule including Remote Affiliate Provisions

Alabama has adopted a new nexus rule providing that out-of-state remote sellers making retail sales of tangible personal property in Alabama are required to register with Alabama for a sales tax license and collect and remit sales tax on all sales made within the state if the seller has substantial nexus. The conditions under which an out-of-state seller must collect and remit sales tax include (but are not limited to) the following: delivery within the state by means of a vehicle owned by the selling entity; the seller maintains, occupies, or uses, permanently or temporarily, directly or indirectly, or through a subsidiary, or agent by whatever name called, an office, place of distribution, sales or sample room or place, warehouse or storage place or other place of business; or the seller employs or retains under contract any representative, agent, salesman, canvasser, solicitor or installer operating in the state under the authority of the person or its subsidiary for the purpose of selling, delivering, or the taking of orders for the sale of tangible personal property or any services subject to tax or otherwise solicits and receives purchases or orders by any agent or salesman.

Under the new affiliate nexus provisions, a seller may also have substantial nexus in Alabama due to business activities conducted in-state by the seller’s affiliates. A remote seller has substantial nexus with the state if the seller and an in-state business maintaining one or more locations within the state are related parties; and the remote seller and the in-state business use an identical or substantially similar name, trade name, trademark, or goodwill, to develop, promote, or maintain sales, or the in-state business and the seller pay for each other’s services in whole or in part contingent upon the volume or value of sales, or the in-state business and the seller share a common business plan or substantially coordinate their business plans, or the in-state business provides services to, or that inure to the benefit of, the business related to developing, promoting, or maintaining the in-state market. Specific rules define a related party based on the nature of the business within the Rule. Transactions on which sales tax is collected by a licensed seller are exempt from use tax obligations of the purchaser. (Rule 810-6-2-.90.01, Alabama Department of Revenue, effective August 24, 2012)

Posted on October 23, 2012