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Originally Posted by rhadin
The question that the U.S. Supreme Court has not yet addressed and which is the basis of the laws passed by California, New York, and other states, is this: What is a sufficient nexus? The Supreme Court said having no physical nexus except shipping into a state is insufficient. But in California, Texas, and New York Amazon may have a sufficient nexus -- the affiliates or subsidiary businesses that are wholly owned by Amazon. The issue is not clear cut and Amazon does not have a guaranteed winning hand.
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Read the decision, it is pretty clear that the nexus must be substantial, not sufficient.
`minimal connection' was found not to be enough. They also specifically ruled on the question of "attaching constitutional significance to a semantic difference" as not being sufficient to equal a physical presence (and they REQUIRE the presence be physical under the decision).
They state clearly that they must emphasize the importance of looking past "the formal language of the tax statute [to] its practical effect." In effect here, California is trying to create a fiction of physical presence where none clearly exists.
And then they go on to basically extol Congress to pass a law to create a way to resolve the underlying issue. Which they have failed to do since the early 90's when they first picked up the issue (though then about Mail order/Catalog, and not online).
If mailing catalog and even computer programs to help promote their sales products does not create a physical presence and substantial nexus, then how does web publishers who place links on line sites that may not even be hosted in the state, just admined by someone in the state, satisfy the clearly required "physical presence" that the court demands?
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Originally Posted by rhadin
The affiliates are in essence sales agents. Call them whatever you want, but the reality is that is what they are. That Amazon prefers to call them something else doesn't make it so. Just like with insurance, the affiliate gets paid for a sale made through the affiliate's link. I personally think that is a sufficient nexus if the affiliate is within the state. But it remains to be seen what the courts will think.
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More like publishers. Sales Agents take a more active approach than placing links. One of the backup decisions for Quill addressed this point as well. By this term, television stations that air ads for a company with no other nexus also create a physical presence nexus. How is that logical, much less in line with the Quill demand for a clear and defined physical presence?
As the Quill decision notes, "In National Geographic Society v. California Bd. of Equalization, 430 U.S. 551, 556 (1977), we expressly rejected a " `slightest presence' standard of constitutional nexus."
So slight presence is not enough, it must be substantial and physical.
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As for how to track the sales tax for each jurisdiction, there are several software programs that do this. After all, Barnes & Noble, Sears, the Agency 6, and WalMart, for example, have to collect sales tax for online sales and do so, so clearly this is not a mountain that can't be readily conquered.
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Big companies with big resources. You expect a small business like..well Dullin's to track almost 10 thousand tax jurisdictions? And which ones except digital goods and which don't? And which ones that do tax digital goods tax them differently than physical goods? By the time you add in all the different permutations of what is and is not taxable, you are taking tens of thousands of different rules. Then you have reporting requirements and forms they must file.
Late edit:
I also forgot to note that they addressed the issue of fairness as well. They noted that North Dakota was arguing that the "touchstone of Due Process is fundamental fairness" and that the "very object" of the Commerce Clause is protection of interstate business against discriminatory local practices, [thus] it would be ironic to exempt Quill from this burden and thereby allow it to enjoy a significant competitive advantage over local retailers.
The court rejected that argument, noting that the Commerce clause in the Constitution isn't about due process fairness, but about a constitutional limit on the power of the states that does not have to satisfy the fairness requirement of a due process limitation.