Maine Sales Tax Changes: Digital Goods, Affiliate Nexus
- Apr 18, 2014 | Gail Cole
A new Maine law includes a subtle change to the state’s affiliate and click-thru nexus laws and extends sales tax to electronically delivered goods. LD 1707, An Act to Amend the State's Tax Laws, was enacted on April 15, 2014, without the governor’s signature. It provides a tidy summary of what is subject to sales tax in Maine.
Electronically delivered products
In Section 9, the definition of tangible personal property was amended to include “any product transferred electronically.” That’s a pretty broad definition that includes any thing that would be subject to sales tax if it were sold in tangible form, such as Maine Revenue Services will interpret this amendment over the long run. A publication on the Maine Revenue Services website reminds that this change took effect on June 26, 2013.
Required to register
In Section 10, 1-A “Persons presumptively required to register” is amended to define (rather than create) “the basis for and obligations associated with the rebuttable presumption created by this subsection that a seller not registered under subsection 1 is engaged in the business of selling tangible personal property or taxable services for use in this State and is required to register as a retailer with the assessor.”
In other words, if you fit the state’s definition for “seller” or if you make a certain amount of sales in Maine through an “affiliated person,” you are required to collect and remit sales tax.
Affiliates and sellers
Maine law defines an affiliated person as: “member of the same controlled group of corporations as the seller or any other entity that, notwithstanding its form of organization, bears the same ownership relationship to the seller as a corporation that is a member of the same controlled group of corporations. For purposes of this subparagraph, ‘controlled group of corporations’ has the same meaning as in the Code, Section 1563(a).”
It also stipulates that a “seller is presumed to be engaged in the business of selling tangible personal property or taxable services for use in this State if an affiliated person has a substantial physical presence in this State or if any person, other than a person acting in its capacity as a common carrier, that has a substantial physical presence in this State:
- Sells a similar line of products as the seller and does so under a business name that is the same as or similar to that of the seller;
- Maintains an office, distribution facility, warehouse or storage place or similar place of business in the State to facilitate the delivery of property or services sold by the seller to the seller's customers;
- Uses trademarks, service marks or trade names in the State that are the same as or substantially similar to those used by the seller;
- Delivers, installs, assembles or performs maintenance services for the seller's customers within the State;
- Facilitates the seller's delivery of property to customers in the State by allowing the seller's customers to pick up property sold by the seller at an office, distribution facility, warehouse, storage place or similar place of business maintained by the person in the State; or
- Conducts any activities in the State that are significantly associated with the seller's ability to establish and maintain a market in the State for the seller's sales.”
If any of the above descriptions sound like you, you must register with the state and collect and remit sales tax in Maine.
But wait! If you were breathing a sigh of relief because you don’t fit any of the above descriptions, hold on to that breath. Sellers are also presumed to be engaged in business in the State of Maine (and therefore required to collect and remit sales tax) when they enter “into an agreement with a person under which the person, for a commission or other consideration, while within this state:
- “Directly or indirectly refers potential customers, whether by a link on an Internet website, by telemarketing, by an in-person presentation or otherwise, to the seller; and
- The cumulative gross receipts from retail sales by the seller to the customers in the State who are referred to the seller by all persons with this type of an agreement with the seller are in excess of $10,000 during the preceding 12 months.”
The rebuttable presumption clarifies that the existence of an agreement between a referring seller and an out-of-state seller does not in and of itself create a sales tax obligation. Annual in-state sales must total more than $10,000.
Before Maine’s affiliate nexus law took effect in October 2013, online giant Amazon.com marketed to Maine customers through Maine affiliates. However, once the new requirements took effect, Amazon terminated its relationships with Maine affiliates.
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