Idaho Enacts Affiliate Nexus Provisions

Effective July 1, 2008, a retailer engaged in business in Idaho is to be defined as any retailer with substantial nexus in the state. A retailer has substantial nexus if both of the following apply:

1. The retailer and an in-state business maintaining one or more locations within this state are related parties; and
2. The retailer 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 provides services to, or that inure to the benefit of, the out-of-state business related to developing, promoting or maintaining the in-state market.

To be considered as two related entities, the two parties must meet any one of the following tests:

1. Both entities are component members of the same controlled group of corporations under section 1563 of the Internal Revenue Code;
2. One entity is a related taxpayer to the other entity under the provisions of section 267 of the Internal Revenue Code;
3. One entity is a corporation and the other entity and any party, for which section 318 of the Internal Revenue Code requires an attribution of ownership of stock from that party to the entity, own directly, indirectly, beneficially, or constructively at least fifty percent (50%) of the value of the outstanding stock of the corporation; or
4. One or both entities is a limited liability company, partnership, estate or trust, none of which is treated as a corporation for federal income tax purposes, and such limited liability company, partnership, estate or trust and its members, partners or beneficiaries own in the aggregate directly, indirectly, beneficially, or constructively at least fifty percent (50%) of the profits, capital, stock or value of the other entity or both entities.

The provisions of this section of Idaho code (Sec. 63-3615A, Substantial nexus) do not apply to retailers with sales less than $100,000 into Idaho in the previous year. (Ch. 49 (H.B. 360), Laws 2008, effective July 1, 2008).