Michigan Enacts Sales And Use Tax Click-Through Nexus And Affiliate Nexus Provisions

On January 15, Michigan Governor Rick Snyder approved legislation that implements click-through nexus and affiliate nexus provisions for purposes of the state's sales and use tax.1 The click-through nexus provision creates a presumption of nexus for out-of-state sellers that have an agreement to pay a Michigan resident for providing a link to the seller's Web site. The affiliate nexus provision creates a presumption of nexus for out-of-state sellers if a person or affiliate in Michigan performs certain activities for the seller. The legislation is effective October 1, 2015.

Click-Through Nexus

A seller is presumed to be engaged in the business of making retail sales of tangible personal property in Michigan if the seller enters into an agreement with one or more Michigan residents under which the residents, for a commission or other consideration, directly or indirectly refer potential purchasers, whether by a link on an Internet Web site, in-person oral presentation or otherwise, to the seller.2

This provision only applies if the cumulative gross receipts from sales by the seller to purchasers in Michigan, who are referred to the seller by all residents with this type of agreement, exceed $10,000 during the preceding 12 months.3 Also, the seller's total cumulative gross receipts from all purchasers in Michigan must exceed $50,000 during the immediately preceding 12 months.4 For purposes of these thresholds, the 12 months before the effective date of this law are included as part of the "preceding 12 months."5 An agreement under which a seller purchases advertisements from a person in Michigan to be delivered through television, radio, print, the Internet or any other medium does not constitute an agreement subject to the click-through nexus rules unless the advertising revenue paid to the person in Michigan consists of commissions or other consideration that is based on completed sales of tangible personal property.6

Rebuttable Presumption

The click-through nexus presumption may be rebutted by the seller by demonstrating that the Michigan residents with whom the seller has an agreement did not engage in any solicitation or any other activity within Michigan that was significantly associated with the seller's ability to establish or maintain a market in the state for the seller's sales of tangible personal property to purchasers in the state.7 The presumption is considered rebutted by evidence of:

Written agreements prohibiting all of the...