Tax Alert

New York’s Highest Court Affirms Sales Tax Collection Responsibility Due to “Click-Through” Nexus
(April 1, 2013)

On March 28, the New York Court of Appeals sided against and and upheld New York’s “click-through” nexus rule, which creates a rebuttable presumption that Internet retailers are soliciting sales of goods or taxable services when New York State businesses receive a commission from an Internet retailer. If Internet retailers are not able to rebut this presumption, they must collect New York State sales tax.

Instances when click-through nexus exists include:

  • A New York business maintains a link to an out-of-state retailer such as or on its website.
  • New York residents click on a link maintained by an out-of-state retailer to access that retailer’s website.
  • An out-of-state retailer pays a commission to a New York-based business when a customer purchases goods after accessing the out-of-state retailer’s site through a link housed on the New York-based business’s website.

In Quill Corp. v. North Dakota, the U.S. Supreme Court held that an out-of-state retailer could not be required to collect sales tax unless it had a physical presence in the state. The New York Court’s ruling holds that the statute is constitutional on its face but questions whether affiliates' receipt of commissions via click-through links satisfies the physical presence test and is the equivalent of using a New York-based commission sales force. and are expected to continue to challenge the constitutionality of the statute as applied to them. New York has been at the vanguard of nexus expansion in the sales tax arena. Emboldened by lack of action at the federal level and recent wins in state courts, at least 15 states, including California, Connecticut, Illinois, and Michigan, have adopted similar legislation specifically designed to require or compel online retailers to collect sales and use tax.


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