Online Retailers Beware: States Broaden the Tax Net

The debate over whether online retailers are required to collect sales tax has traditionally focused on whether the online retailer has a physical presence in the state. Without having to resolve this constitutional question, states have identified a common business arrangement that they now assert results in sales tax nexus, requiring collection of tax, even when the seller has no physical presence in the state. This business arrangement is the use of affiliate programs to generate internet sales for out-of-state online retailers.