United States: Kansas Enacts Sales And Use Tax Click-Through Nexus And Affiliate Nexus Provisions

On April 16, Kansas Governor Sam Brownback 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-ofstate retailers that have an agreement to pay a Kansas resident for providing a link to the retailer's Web site. The affiliate nexus provision creates a presumption of nexus for outof- state retailers if a person or affiliate in Kansas performs certain activities for the retailer. Also, the legislation adds sales tax registration requirements for government contractors and amends service fee provisions. Most of the law is effective on July 1, 2013, but the click-through nexus provision is effective 90 days after the date on which the statute is published in the Kansas Register, which effects enactment of the statute.2

Click-Through Nexus

An out-of-state retailer is presumed to be doing business in Kansas if the retailer enters into an agreement with one or more Kansas 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 or otherwise, to the retailer.3

This provision only applies if the cumulative gross receipts from sales by the retailer to purchasers in Kansas, who are referred to the retailer by all residents under this type of agreement, exceed $10,000 during the preceding 12 months.4 For purposes of this provision, the 12 months before the effective date of this law are included as part of the preceding 12 months (as a means to ensure that the provision is not further delayed by application of this test).

Rebuttable Presumption

The presumption may be rebutted by submitting proof that the residents with whom the retailer has an agreement did not engage in any activity within Kansas that was significantly associated with the retailer's ability to establish or maintain its market in Kansas during the preceding 12 months.5 The retailer may prove this by submitting written statements from all of the residents with whom the retailer has an agreement that they did not engage in any solicitation in Kansas on behalf of the retailer during the preceding year.6

Affiliate Nexus

An out-of-state retailer is presumed to be doing business in Kansas if any person, other than a common carrier, that has sales tax nexus with Kansas engages in any of the following activities:

  • Sells the same or a substantially similar line of products as the retailer and does so under the same business name or a substantially similar business name;
  • Maintains a distribution house, sales house, warehouse or similar place of business in Kansas that delivers or facilitates the sale or delivery of property sold by the retailer to consumers;
  • Uses trademarks, service marks or trade names in Kansas that are the same or substantially similar to those used by the retailer;
  • Delivers, installs, assembles or performs maintenance services for the retailer's customers within Kansas;
  • Facilitates the retailer's delivery of property to customers in Kansas by allowing the retailer's customers to pick up property sold by the retailer at an office, distribution facility, warehouse, storage place or similar place of business maintained by the person in the state;
  • Has a franchisee or licensee operating under its trade name if the franchisee or the licensee is required to collect Kansas sales tax; or
  • Conducts any other activities in Kansas that are significantly associated with the retailer's ability to establish and maintain a market in the state for the retailer's sales.7

Any affiliated person conducting any of the activities listed above or satisfying the click through nexus provisions has nexus with Kansas sufficient to require the person to collect and remit taxes under the U.S. Constitution and federal laws if the person were making taxable retail sales of tangible personal property or services in Kansas.8 An "affiliated person" means any person that is a member of the same "controlled group of corporations" as defined by IRC Section 1563(a) as the retailer or any other entity that, notwithstanding its form of organization, bears the same ownership relationship to the retailer as a corporation that is a member of the same controlled group of corporations.9

Rebuttable Presumption

The presumptions may be rebutted by demonstrating that the activities of the person or affiliated person in Kansas are not significantly associated with the retailer's ability to establish or maintain the retailer's market in Kansas.10

Government Contractors

Effective July 1, 2013, sales tax registration requirements apply to any person selling or leasing tangible personal property to the state, a state department, a state agency or an agent.11 Prior to the sale or lease, the person and any affiliated person must register with the Kansas Department of Revenue as a retailer and comply with all legal requirements imposed on a retailer, including the requirement to collect and remit sales or use tax on all taxable sales of tangible personal property to customers in Kansas.12

Tax Collection Agreements with State

Effective July 1, 2013, any agreement between a retailer and the state's executive branch or any other state agency or department that the retailer is not required to collect sales and use tax in Kansas despite the presence of a warehouse, distribution center or fulfillment center that is owned or operated by the retailer or an affiliated person is void, unless specifically approved by the legislature.13

Service Fees

A taxpayer entering into an installment payment plan with the Department to pay off a delinquent tax liability is assessed a service fee of $25 (previously, $10) if the time period exceeds 90 days.14 A taxpayer requesting a full or partial abatement of tax liability is assessed a service fee of $50.15


Kansas is the latest state to follow the trend of enacting click-through nexus and affiliate nexus provisions that are designed to improve sales and use tax collections.16 Although the sales tax nexus legislation being enacted by many states is similar, the legislation in each state differs slightly from the legislation in other states, resulting in a significant burden on companies that have no physical presence in these states, but have tangential contacts with these states through affiliates or associates.

The click-through statute enacted by Kansas is relatively similar to the New York statute. The New York State Court of Appeals, the state's highest court, recently held that New York's click-through nexus statute does not facially violate the U.S. Constitution under either the Commerce or Due Process Clauses.17

The affiliate nexus provision is not limited to out-of-state retailers that have a common ownership relationship with an entity in Kansas. Nexus is established if a "person" in Kansas engages in any of the listed activities for the retailer. There is no requirement that the "person" be a member of the same controlled group of corporations as the retailer. Along with the various states that have proposed or enacted sales tax nexus laws, the Marketplace Fairness Act is currently being considered by the U.S. Senate.18 The Act would allow states to require remote sellers to collect and remit sales tax to jurisdictions in which their customers are located. States would be given the authority to compel the collection of sales tax provided they simplify their sales tax laws. Online retailers with outof- state sales of no more than $1 million a year would be exempt. Presumably, if this federal legislation is enacted and states make the simplifying changes to their sales tax statutes, the need to enact click-through nexus or affiliate nexus legislation to compel remote sellers to collect sales tax will wane.


1 S.B. 83, Laws 2013.

2 Note that this legislation was published in the Kansas Register on April 25, 2013. Thus, the click-through nexus provision will be effective July 24, 2013.

3 KAN. STAT. ANN. § 79-3702(h)(2)(C). The click-through nexus provision applies to sales made and uses occurring on or after the effective date and without regard to the date the parties entered into the agreement.

4 Id.

5 Id.

6 Id. The statements must be provided and obtained in good faith.

7 KAN. STAT. ANN. § 79-3702(h)(2)(A). Note that the legislation repeals existing nexus presumptions where: (i) the retailer holds a substantial ownership interest in, or is owned in whole or substantial part by, a retailer maintaining a sales location in Kansas and the retailer sells the same or a substantially similar line of products as the related Kansas retailer and does so under the same or a substantially similar business name, or the Kansas facilities or employees of the related Kansas retailer are used to advertise, promote or facilitate sales; or (ii) the retailer holds a substantial ownership interest in, or is owned in whole or in substantial part by, a business that maintains a distribution house, sales house, warehouse or similar place of business in Kansas that delivers property sold by the retailer to consumers.

8 KAN. STAT. ANN. § 79-3702(h)(2)(B).

9 KAN. STAT. ANN. § 79-3702(j).

10 KAN. STAT. ANN. § 79-3702(h)(2)(D).

11 S.B. 83, § 9(a).

12 Note that the new statute uses the same definition of "affiliated person" that is used by the sales tax nexus statute above. S.B. 83, § 9(c).

13 S.B. 83, § 9(b).

14 KAN. STAT. ANN. § 75-5162(a).

15 KAN. STAT. ANN. § 75-5162(b).

16 The following states have enacted click-through nexus laws: Arkansas, California, Connecticut, Georgia, Illinois, New York, North Carolina, Rhode Island and Vermont (contingent on 15 or more states enacting click-through nexus legislation).

17 Overstock.com, Inc. v. New York State Department of Taxation and Finance, New York State Court of Appeals, Nos. 33 and 34, March 28, 2013. For a discussion of this case, see GT SALT Alert: New York State Court of Appeals Holds Click-Through Nexus Statute Is Facially Constitutional.

18 S. 743, originally introduced as S. 336 on Feb. 14, 2013.

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