Vermont Signs Click-Through Nexus, Reporting Requirements Legislation

Vermont Governor Peter Shumlin has signed legislation that includes provisions for “click-through nexus” and remote seller reporting requirements. The “click-through nexus” provision states that a person making sales subject to sales and use tax is presumed to be soliciting business through an independent agent if they enter into an agreement with a Vermont resident who directly or indirectly refers potential customers to them by a website link or other means in exchange for a commission or other consideration. The presumption only applies if cumulative gross receipts from sales to Vermont customers through this type of referral exceed $10,000 in the preceding tax year. Sellers can rebut this presumption with proof that the referring agent didn’t engage in solicitation in Vermont on their behalf that would satisfy the nexus requirements of the U.S. Constitution during the applicable tax year. The “click-through nexus” provision is scheduled to become effective when 15 or more states have adopted requirements that are the same, substantially similar, or significantly comparable to Vermont’s requirements, as determined by the Attorney General. The legislation also includes a provision for remote seller reporting requirements. Retailers and online auction websites that don’t collect sales tax are required to notify Vermont customers that use tax is due and must be paid on nonexempt purchases of tangible personal property, services, or products transferred electronically. The reporting requirement is scheduled to be repealed when 15 or more other states have adopted requirements that are the same, substantially similar, or significantly comparable to Vermont’s “click-through nexus” requirements, as determined by the Attorney General. Retailers and online auction websites with gross sales of less than $100,000 in the prior year and reasonable expectation to make less than $100,000 in gross sales in the current year are exempt from the notice requirements. For qualifying retailers, the notice must be readily visible on their website, catalog order form or receipt. The following information must be included on the notice: the retailer is not required to and does not collect Vermont sales and use tax, the purchase is subject to Vermont use tax unless exempt, the purchase is not exempt because it’s purchased on the internet, by catalog or by other remote means, Vermont requires the purchaser to report any non-taxed purchase and to pay use tax on the purchase, and the tax may be reported and paid on the Vermont use tax form, which is available on the Department of Taxes website. Notice is sufficient if the noncollecting retailer provides a prominent link on its website or a prominent reference on an order form to a supplemental page. The notice should state: “See important Vermont sales and use tax information regarding the tax you may owe directly to the state of Vermont.” Retailers that are required to provide a similar notice in another state are allowed to provide a consolidated notice. Sellers who don’t comply with the provision will not be subject to a criminal penalty or civil liability. The Department of Taxes is required to evaluate the option of providing a voluntary internet-based use tax reporting and payment system to compliment the required notice. The Department is to report its findings by January 15, 2012.

For an update on this news item, visit Vermont Discusses Timeline for Implementing Click-Through Nexus.

(H.B. 436, Laws 2011, effective May 24, 2011, except as noted)

Posted on June 24, 2011