Nevada Enacts Affiliate Nexus Laws


Do you use a Nevada-based business for your online marketing activities? Then read on – because some laws come into effect later this year that could have you packing your corporate bags and moving on.

Click-Through Nexus Law

Nevada’s new click-through nexus is modeled after the law in New York, the state that started it all. On October 1, 2015, non-Nevada retailers who have Nevada affiliates will be required to collect sales tax on sales to Nevada residents. The provision doesn’t kick in until your gross sales in Nevada top $10,000 in any calendar year.

You may know this type of nexus better as Amazon tax, or the Amazon law. The intent is to force Internet retailers into collecting taxes by making some kind of connection to a state. In the case of affiliate marketers, the connection is their physical location. Internet marketers who operate websites promoting company products are considered to be a type of salesperson, helping to facilitate sales of that retailer’s products to Nevada-based consumers. If both the affiliate marketer and the consumer are physically based in Nevada, the sale becomes subject to Nevada sales tax.

In the past, when a state has enacted click-through nexus laws, companies have avoided compliance by ending their affiliate relationship in that state. Amazon, for example, famously terminated its relationships with all affiliate marketers in North Carolina, when that state became one of the first to enact this type of legislation after New York. However, Nevada is also home to a large warehouse industry, including Amazon. If Internet retailers are storing and shipping inventory from Nevada already, they may already be collecting sales tax, which makes cancelling those relationships a moot point.

Affiliate Nexus Law

Nevada also enacted an affiliate nexus law, along the same lines as law put into place a few years ago in Colorado. Starting on July 1, 2015, a non-Nevada retailer will be considered a Nevada retailer for sales taxes if it is part of a controlled group of companies and any member of that group engages in any of the following activities:

  • Sells a similar line of products or services as the retailers and does so under a business name that is the same or similar to that of the retailer;
  • Maintains an office, distribution facility, warehouse or storage place or similar place of business in Nevada to facilitate the delivery of tangible personal property sold by the retailer to its customers;
  • Uses trademarks, service marks or trade names in Nevada that are the same or substantially similar to those used by the retailer;
  • Delivers, installs, assembles or performs maintenance services for the retailer’s customers within Nevada;
  • Facilitates the retailer’s delivery of tangible personal property to customers in Nevada by allowing the retailer’s customers to pick up tangible personal property sold by the retailer at an office, distribution facility, warehouse, storage place or similar place of business maintained by the component member in Nevada; or
  • Conducts any other activities in Nevada that are significantly associated with the retailer’s ability to establish and maintain a market in the state for the retailer’s products or services.

A One-Two-Three Punch for the Nevada Corporate Formation Industry

The Click-through and Affiliate nexus laws come right on the heels of the other changes in Nevada, including the doubling of corporation maintenance fees, and the new gross receipts tax (the Commerce Tax) that will kick in on Nevada-based businesses with earnings of $4m or more. Nevada had been a popular corporate location for some businesses, particularly Internet-based businesses, who were looking to lower taxes by “parking” excess profits inside a Nevada corporation. However, now that business owners will need to factor in the costs of collecting, remitting and reporting their sales tax obligations, in addition to filing the new Commerce Tax Return, it may be time to rethink Nevada as a strategic corporate location.

Can We Help?

If you’ve got questions about what you’ve read, or whether Nevada is or should be the state for you, we can help! We’ve been in business for more than 10 years, and can provide resident agent service in all 50 states. If you are looking for a quality, full-service and affordable resident agent or mailing service, why not contact us for a free quote? You can reach us at info@smartbusinessincorporation.com.

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