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Amazon Laws: The New Normal? Internet Sales Tax Law Update.

author photo of Sylvia F. Dion

E-Commerce and Internet Sales Taxes; possibly the most contentious area in state taxation today! The arguments for and against internet sales taxes come from all directions - from states who contend they’re losing billions in tax revenues as a result of uncollected sales taxes on internet sales, from on-line retailers who maintain that a 1992 Supreme Court decision prohibits states from imposing a sales tax collection requirement, and from brick-and-mortar retailers who argue that traditional sales tax nexus rules puts them at a competitive disadvantage.

In the last few years, the battle over internet sales taxes has escalated, fueled by the “Amazon Laws”. Are they the "New Normal"?

The “New Normal”, a phrase coined in 2008 to describe the then-new period of diminished investment returns and slower economic growth that seemed permanent after the financial crisis and recession of the last decade. Many have borrowed this term to describe what wasn’t expected or normal in the past, but now is.

As I closely follow developments in the internet sales tax area, I’ve often found myself thinking of this phrase and wondering whether “Amazon Laws” are the “new normal”; the expected approach to be taken by states that seek to tax internet sales.

Amazon Laws and Presumptive Nexus, One in the Same

Before launching into a discussion on the status of these “Amazon Laws”, let’s explore how these laws came about and why they’re referred to as such.

These laws, which seek to ensure that internet sales are taxed, have been nicknamed "Amazon Laws" primarily after their most visible target, but also because (and sued the State of New York after it passed the nation's first "Amazon Law" in 2008. Legally, they're "presumptive nexus" laws; meaning that if a "taxpayer" engages in the activity described in the law, a presumption of nexus is deemed to exist. In the case of sales tax nexus, this presumption permits a state to impose a sales tax collection requirement on an out-of-state seller. Other nicknames for these laws include “web-linking”, “click-through”, and “affiliate" nexus laws.

Why Have States Enacted “Amazon Laws”?

If you’re a state tax professional, you’re familiar with the 1992 U.S. Supreme Court decision that set the boundary for when a state can impose a collection requirement on an out-of-state ('remote") seller.

This decision, Quill, involved a Delaware based mail order company, Quill Corporation, and the State of North Dakota. (Quill Corp. v. North Dakota, 504 U.S. 298 (1992). An entire discussion could be devoted to Quill, but in a nutshell, in this decision the Supreme Court held that in order for a state to impose a sales tax collection requirement on a company participating in interstate commerce within the state's borders, "substantial nexus" must be shown. According to Quill, substantial nexus requires a physical presence (e.g., offices, employees) in the state.

As the U.S. Supreme Court has yet to overturn Quill, it remains good law. But fast forward almost twenty years, internet commerce has exploded and states have become frustrated with their inability to impose a sales tax collection requirement on remote sellers with no physical presence in their state and with the resulting loss of sales tax revenue. Rather than acquiesce to Quill and focus their efforts on use tax enforcement, states have enacted laws that stretch the nexus envelope by connecting in-state “affiliates” to out-of-state sellers. The basic premise behind these “Amazon Laws” is that a “contract” between a remote seller and an in-state “party” (a business or individual) who posts a web-link on their in-state website and receives a commission for referrals via the web-link to the remote seller’s on-line store creates a in-state presence for the remote seller and a presumption of nexus.

The State of the States - Which States Have Introduced, Vetoed, and Passed Amazon Legislation

In April of 2008, New York made history when it enacted the nation’s first presumptive nexus law. Since then, "Amazon" legislation has been introduced in almost half the states! In some states, "Amazon" legislation was passed and vetoed in an earlier year only to see "Amazon" legislation re-introduced in a later year. Here's a recap of the state of the States.

In addition to New York, the following states have introduced "Amazon" type legislation sometime during the last three years: Arkansas, Arizona, California, Colorado, Connecticut, Hawaii, Illinois, Iowa, Louisiana, Maryland, Massachusetts, Minnesota, Mississippi, Missouri, New Mexico, North Carolina, Rhode Island, South Dakota, Tennessee, Texas, Vermont and Virginia.

Of these states, seven states have enacted final web-linking, "Amazon Laws" including: New York (2008), North Carolina, Rhode Island (both in 2009), Arkansas, California, Connecticut, and Illinois (all in 2011). Also enacted was Colorado's Notification and Reporting Law (2010). Although not a true "Amazon Law", it is often mentioned in this category since its strict notification, reporting and penalty regime, was seen as a mechanism to increase the collection of internet sales taxes by forcing remote retailers to register as sales tax collectors.

States in which "Amazon" legislation was vetoed include Hawaii (vetoed in 2009, re-introduced in 2011), California (vetoed in 2009, passed in 2011), Texas (vetoed on 5/31/11, re-introduced as part of budget bill). And finally, states which have passed legislation in 2011 that are simply awaiting Governor signature to become final include Louisiana and Vermont.

Final Thoughts

Those controversial “Amazon Laws”! Some studies indicate that these laws have failed to generate the anticipated sales tax revenues or to “level the playing field” between brick-and-mortar and on-line retailers. Because their largest target,, has consistently severed its affiliate contracts in every "Amazon Law" state (except New York), these laws have failed to force the mega-on line retailer to register as a sales tax collector. They've also reduced corporate and personal income tax collections as in-state affiliates have lost their Amazon commission income stream and have caused entire businesses to relocate to non-Amazon Law states. Because their constitutionality is questionable, they invite litigation, and are currently being challenged in New York, Colorado and Illinois. Yet despite all this, states continue to plow ahead and introduce "Amazon" legislation. The "New Normal"? We will have to wait and see.

About the Author: Sylvia Dion is the Founder and Managing Partner of PrietoDion Consulting Partners LLC, a SALT advisory firm which provides SALT services to businesses in the U.S. and throughout Europe, Canada, Latin American and Australia. Since 2011 Sylvia has served as a contributor to the SalesTaxSupport blogs and currently blogs on Internet Sales Tax, U.S. Sales Tax for Foreign Sellers, and Massachusetts Sales Tax. Sylvia has written articles for State Tax Notes, Bloomberg BNA and other premier tax journals. You can follow Sylvia on twitter and on Google+ and can contact Sylvia via e-mail at

Comments or questions may be submitted by using the on-page "Comment" feature, subject to disclaimer at bottom of page. Other contact options (and Consultation Requests) are also available on Sylvia's associated Firm Profile page.

Other recent “Internet Tax / E-Commerce” posts by Sylvia F. Dion, CPA:

NOTE: All blog content, comments, and participation subject to disclaimer at bottom of page.


2 Responses to Amazon Laws: The New Normal? Internet Sales Tax Law Update.

  • Posted by Mark on January 9, 2012 1:35pm:

    Good article especially your final thoughts. I am dealing with Florida House 2012 - Bill 861. This is now the 4th year in a row I will spend my time fighting the destruction of my Internet business instead of Growing it to employ more Floridians. Both sides of this argument are valid. I also want Florida to have more revenue, but this is not the way. If the Affiliate Nexus passes, Amazon will terminate all Florida affiliates and the Nexus will be broken. Florida will not get any money and I'll be unemployed. I just can't get anyone to listen to me in Tallahassee.

    • Posted by Author photo of Sylvia F. DionSylvia F. Dion on January 11, 2012 2:22am:

      Thank you for your comment! You bring up several very valid points - one, that Amazon will likely take the same actions it has in other states that have enacted 'Amazon Laws' and sever its ties with its Florida marketing affiliates ("Amazon Associates") - leaving their marketing affiliates with a sudden loss of this revenue stream - which for some marketing affiliates can be substantial. This is what occurred when Illinois passed its 'Amazon Law' and some affiliates, like, moved across the state line because the loss of commission revenue was just too much for FatWallet to give up. Plus, to the extent Florida's marketing affiliates are corporations, this will result in a reduction in Florida's corporate tax revenues. Another valid point is that, even though Florida needs the revenue and use tax isn't being remitted the way it should, enacting legislation that is destructive to internet businesses isn't the answer. While I sympathize with the true 'Main Street" retailers - the little guys who are trying to keep their family owned businesses alive - many small-medium sized internet retailers are trying to do the same. I've been watching the developments in Florida and will be including this development in my next post. Like I said in the post, even though we have so much happening at the federal level (with three proposals currently before Congress), states are not stopping from legislating their own 'Amazon Laws'. Again, thanks for the comment!

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