Legal Matters: Removing the Confusion Surrounding State ‘Amazon Laws’

North Carolina, Rhode Island, Arkansas and Connecticut's statutes employ the same language as the New York law ("for a commission or other consideration"), but their departments of revenue haven't issued similar TSBs clarifying their interpretation and application of the new laws. Because the statutory language is essentially the same as in New York and, in fact, was modeled after the New York legislation, it would be logical to interpret these state laws in the same way (i.e., that PPC relationships don't create a presumption of nexus), but it's conceivable that an aggressive state tax auditor from one of those states will maintain that the words "other consideration" apply to any form of compensation, including a fixed fee paid every time a referral occurs from a website owned by an in-state resident to an out-of-state retailer's website, whether or not a sale occurs.

The compensation provision in the Illinois web affiliate statute is slightly different from those in New York, North Carolina, Rhode Island, Arkansas and Connecticut. The Illinois legislation refers to "a commission or other consideration based upon the sale of tangible personal property by the retailer."

The plain statutory language appears to apply only to compensation arrangements where the Illinois website owner is compensated through a formula determined by or based upon the number of sale transactions or the dollar value of sales resulting from the link referrals they generate.

In other words, the statute requires that a sale occur in order for the website owner to be compensated for his or her services. Consequently, the Illinois law doesn't extend to PPC arrangements that don't require a sale in order to trigger or measure the fee arrangement.

George S. Isaacson is a senior partner at Brann & Isaacson, a direct marketing law firm. Reach George at gisaacson@brannlaw.com.