As a small to medium business, expanding your operations beyond your home state is a key next step, opening up new markets and growth opportunities. However, it also brings a complex network of laws and tax obligations, making it difficult to keep up as you gain nexus in each state. We have created this guide to help you better understand what’s expected of you by each state to facilitate tax planning and the meeting of state-by-state obligations.
What are Affiliate Nexus Laws?
Affiliate nexus laws refer to regulations surrounding tax collection procedures for state sales tax, income taxes, and capital gain taxes when an out-of-state business like yours wants to sell goods in other states. Your nexus is based on your relationship to in-state entities, often regardless of your economic nexus, based on sales and/or number of sales.
Before the eCommerce boom, businesses traditionally had to have a physical presence in a state, like a warehouse or satellite office. However, when the Internet opened up the marketplace across state lines, states had to rethink what nexus is to align with modern business models. And this isn’t exclusive to eCommerce, by the way. Mail and telephone sales crossed state lines long before the Internet did. E-commerce is just one of several types of companies that led to updated affiliate nexus laws.
These laws expand the nexus concept to certain affiliations and activities that are said to create a nexus, which is the point at which you have a significant enough presence to follow their nexus laws and maintain state-specific reporting. You can learn more about Sales Tax vs. Use Tax here.
Key factors that could establish a nexus vary by state. Thus, the complexity. However, they could include:
- Shared Ownership or Control – If your business is related to an in-state company through ownership or control
- Similar Business Activities – Selling similar products or services under a similar name or trademark as an in-state affiliate.
- In-State Services – Using in-state affiliates to provide services like delivery, installation, or maintenance to customers.
- Marketing and Promotion – Having agreements with in-state entities to promote your products, often in exchange for commissions (e.g., online affiliate programs)
Typically, you have a nexus if just one of the criteria applies to your out-of-state business.
What is Click-Through Nexus?
A click-through nexus is a type of affiliate nexus that is specific to online business relationships. In it, you and out-of-state businesses have agreements with people in a state to send customers to you—often via an affiliate link. They get a pre-defined commission in exchange for sending you a new customer.
A Breakdown of Affiliate Nexus State by State
If you meet the nexus thresholds defined below, you must register with that state, collect sales taxes (as applicable), and remit tax on the dates established by that state.
Before we get into the list, the following states do not have sales tax, so they are not included in the state-by-state nexus laws guide:
- Alaska
- Delaware
- Montana
- New Hampshire
- Oregon
Additionally, the following states do not have click-through nexus laws but may have other affiliate nexus laws (outlined below). If they have neither, follow the economic nexus laws covered in a previous article and seek expert tax consulting:
- Alabama
- Arizona
- Indiana
- Maryland
- Massachusetts
- Nebraska
- North Dakota
- Oklahoma
- South Carolina
- South Dakota
- Texas
- Utah
- Virginia
- Washington, DC
- West Virginia
- Wisconsin
- Wyoming
If you believe you have an affiliate nexus in any of the states below, you should additionally contact the state and reach out to the nexus law experts at DHJJ for additional clarification on that state’s Affiliate Nexus Laws for a Nexus Study that evaluates your nexus status in each state.
Alabama
- In-State Affiliates – Nexus is established if you have ties to businesses in Alabama that use a similar name, trademark, or branding to promote sales.
- Shared Business Plans – Affiliations involve shared business strategies or plans.
- Market Development Activities – If an in-state affiliate provides services that help develop or maintain your market presence in Alabama.
Arizona
- In-State Representatives – Using independent contractors or other non-employee representatives in Arizona who help establish or maintain a market for your products.
- Duration of Presence – Representatives are in Arizona for more than two days per year to conduct activities on your behalf.
- Promotional Activities – Affiliates who cross-promote, advertise, or facilitate sales in Arizona for your business.
Arkansas
Arkansas has recently repealed more complex nexus laws and reverted to purely economic nexus standards, as follows: If your sales into Arkansas exceed $100,000 or 200 transactions annually, you are required to collect and remit sales tax, regardless of affiliate relationships.
California
- In-State Affiliates: You have affiliates in California that use similar trademarks, service marks, or trade names.
- Commonly Controlled Group: Your business is part of a commonly controlled group where an in-state entity performs services to help establish or maintain a market for your business.
- Shared Resources: You share management, business systems, or employees with an in-state affiliate.
Colorado
- Controlled Group Relationship: Your business is part of a controlled group with a component member in Colorado that performs activities to help establish or maintain a market for your business.
- Use of Similar Trademarks: In-state affiliates use similar trademarks, trade names, or logos as your business.
- Customer Pick-Up: You allow customers to pick up goods sold by your business at a place of business maintained by an in-state affiliate.
Connecticut
- Common Ownership – Your business is directly or indirectly owned by, or under common ownership with, a retailer operating in Connecticut.
- Similar Business Activities – Engaging in a similar line of business as your Connecticut affiliate, using similar trademarks or trade names.
- In-State Services – Affiliates in Connecticut help develop, promote, or maintain your market presence in the state.
Florida
- Affiliated Group Membership – Your business is part of an affiliated group where an in-state entity has a substantial physical presence in Florida.
- Shared Activities – The Florida affiliate conducts activities that benefit your out-of-state business, such as marketing or customer support.
- Mail-Order and Remote Sales – Florida considers relationships with in-state affiliates for mail-order or remote sales.
Georgia
- Similar Products and Branding – You are selling products under a business name or trademarks substantially similar to an in-state affiliate.
- In-State Services – Affiliates provide services like assembly, installation, or maintenance for your Georgia customers.
- Promotional Activities – Affiliates conduct activities that help establish or maintain your market presence in Georgia.
Hawaii
- In-State Affiliates: You have affiliates in Hawaii that use similar trademarks, trade names, or service marks as your business.
- Common Ownership: Your business shares common ownership with an entity in Hawaii that helps establish or maintain your market presence in the state.
- Market Development Activities: Affiliates in Hawaii conduct activities, such as marketing, advertising, or customer support, that help promote or maintain your business’s market presence.
- Commission-Based Referrals: You have agreements with Hawaii-based affiliates who refer customers to your business for commissions.
Idaho
- Related Parties: You and an in-state business are related through ownership or control.
- Similar Trademarks: You use a substantially similar name, trade name, or trademark as an in-state affiliate.
- Market Development: Affiliates provide services that help develop or maintain your market in Idaho.
Illinois
- Commonly Controlled Entities – You’re part of a group with an in-state entity using similar trademarks or trade names.
- Commission-Based Referrals – Having contracts with Illinois residents who refer customers to your business for commissions, exceeding $10,000 in sales during the preceding four quarters.
Note: A Law Reinstatement occurred, and affiliate nexus provisions were reinstated effective January 1, 2020. We’ll point out that this necessitates staying informed about changes in each state. Updates and repeals to Affiliate Nexus Laws can change the nexus status you believe you might have.
Indiana
- Affiliated Entities – Affiliates in Indiana use trademarks or trade names similar to your business.
- Market Activities – In-state affiliates conduct activities that help establish or maintain your market in Indiana.
Iowa
- Similar Branding – You use similar trademarks or trade names as an in-state affiliate.
- Market Development – Affiliates conduct activities that significantly help establish or maintain your market in Iowa.
- Common Ownership – Affiliates are related through common ownership or control.
Kansas
Affiliate Nexus Laws changed for Kansas on July 1, 2021. Previously, you had a nexus if an in-state entity sold similar products under a similar name or facilitated sales or deliveries on your behalf. As of July 1, 2021, Kansas requires remote sellers to collect and remit sales tax if sales exceed the state’s current threshold. Be sure to consult with a tax advisor to determine if your sales volume meets the threshold.
Kentucky
- In-State Affiliates: You have affiliates in Kentucky that use similar trademarks, trade names, or service marks as your business.
- Common Ownership: Your business shares common ownership or control with an in-state entity that helps establish or maintain your market in Kentucky.
- Market Development Activities: Affiliates in Kentucky engage in activities such as marketing, advertising, or facilitating sales that promote or support your business’s presence in the state.
Louisiana
- Similar Products and Branding – You sell a similar line of products as an in-state business using similar trademarks or trade names.
- Affiliated Agents – You use in-state affiliates who solicit business or refer customers for a commission or other consideration.
- Ownership Interests – You hold a substantial ownership interest in, or being owned by, an in-state retailer with sales locations in Louisiana.
Maine
- Common Ownership – You share common ownership with an in-state affiliate that has a physical presence in Maine.
- Similar Trademarks – You use trademarks, service marks, or trade names similar to those used by an in-state affiliate.
- Market Development Activities – Affiliates conduct activities that help establish or maintain your market in Maine.
Massachusetts
- Common Ownership – Affiliates in Massachusetts share common ownership or control with your business.
- In-State Activities – Affiliates perform activities like advertising, marketing, or other services that help establish or maintain your market in Massachusetts.
Michigan
- In-State Affiliates – Affiliates in Michigan use similar trademarks or trade names as your business.
- Market Facilitation – Affiliates provide services that assist in establishing or maintaining your market in Michigan.
- Common Ownership – You share ownership or control with a Michigan entity engaged in similar business activities.
Minnesota
- Affiliated Entities – In-state affiliates promote or facilitate sales on your behalf.
- Shared Trademarks – You use a trademark, service mark, or trade name that is the same as or substantially similar to that of an in-state affiliate.
- Delivery and Pick-Up – You allow customers to pick up goods your business sells at a location maintained by an in-state affiliate.
Mississippi
- Affiliated Entities – Affiliates in Mississippi use similar trademarks or trade names similar to your business.
- Market Support – In-state affiliates provide services that help establish or maintain your market in Mississippi.
Missouri
- Similar Products and Branding – You sell a similar line of products under a business name or trademarks similar to an in-state entity.
- In-State Activities – Affiliates conduct activities in Missouri that help establish or maintain your market presence.
- Customer Pick-Up – You Facilitate the delivery of goods by allowing customers to pick up products at an in-state location.
Nebraska
- Common Ownership – Your business is owned or controlled by the same interests as a retailer engaged in business in Nebraska.
- Affiliated Entities – Affiliates perform activities in Nebraska that help establish or maintain your market.
Nevada
- Controlled Group – You are part of a controlled group of business entities with a component member in Nevada who performs activities that benefit your sales.
- Market Enhancement – Affiliates conduct activities in Nevada significantly associated with your ability to establish or maintain a market in the state.
New Jersey
- In-State Agents – You have independent contractors or other representatives in New Jersey acting on your behalf.
- Affiliated Entities – Affiliates engage in activities that help establish or maintain your market in New Jersey
New York
- Shared Trademarks – You use trademarks, service marks, or trade names similar to those used by an affiliate in New York.
- Market Development Activities – Affiliates conduct activities in New York that help develop or maintain your market presence.
North Carolina
- Click-Through Nexus – Agreements with North Carolina residents who refer customers via a link, and your gross sales exceed $10,000 from these referrals.
- Affiliated Entities – Affiliates use similar trademarks or trade names or provide services that help establish or maintain your market in North Carolina.
North Dakota
- Affiliated Entities – Affiliates in North Dakota conducting activities that help establish or maintain your market.
- Similar Branding – You use trademarks or trade names similar to those used by an in-state affiliate.
Ohio
- Affiliate Nexus: Affiliates in Ohio that facilitate deliveries, accept returns, or conduct activities on your behalf can create a nexus.
- Updated Nexus Laws: Ohio’s nexus standards have shifted towards economic nexus. For more information on economic thresholds, refer to our article on economic nexus to determine if you need to collect and remit sales tax.
Oklahoma
- Similar Trademarks – You use trademarks, service marks, or trade names similar to those used by an in-state affiliate.
- Similar Products and Branding – You sell similar products under a similar business name as an in-state entity.
- Market Development Activities – Affiliates engage in activities that significantly help establish or maintain your market in Oklahoma.
Pennsylvania
- Similar Products and Branding – You sell similar products under a business name or trademarks similar to an in-state affiliate.
- In-State Services – Affiliates deliver, install, or assemble products for your customers in Pennsylvania.
- Marketing Support – Affiliates promote your business or facilitating sales on your behalf.
Rhode Island
- Common Ownership – Sharing ownership or control with an in-state affiliate.
- Similar Trademarks – Using trademarks or trade names similar to those used by an in-state affiliate.
- Market Support Activities – Affiliates conducting activities in Rhode Island that help establish or maintain your market presence.
South Carolina
- Similar Products and Branding – You sell similar products under a business name or trademarks similar to an in-state affiliate.
- Customer Services – Affiliates accept returns, take orders, or perform customer service duties on your behalf.
- Advertising Materials – Affiliates distribute advertising materials or promote your products in South Carolina.
South Dakota
- Ownership Interests – Your business holds substantial ownership in, or is owned by, a retailer with a physical presence in South Dakota.
- Similar Business Name – You sell products under a business name substantially similar to that of an in-state affiliate.
- Advertising and Promotion – Affiliates advertise or promote your sales in South Dakota.
Tennessee
- Affiliated Entities – Affiliates in Tennessee use trademarks or trade names similar to your business.
- Distribution Facilities – You use in-state affiliates to distribute or deliver your products.
Texas
- Affiliated Entities – In-state affiliates maintain a place of business in Texas and sell similar products under a similar name.
- Market Support Activities – Affiliates advertise, promote, or facilitate sales on your behalf.
- Distribution Facilities – Affiliates maintain a distribution center or similar facility in Texas for your products.
Utah
- Common Ownership – Affiliates own more than 10% of your business, or vice versa.
- Similar Products and Branding – You sell similar products under a similar name or trademarks as an in-state affiliate.
- Marketing Activities – Affiliates advertise or assist in sales in Utah.
Vermont
- Common Ownership – You control an entity engaged in a similar business in Vermont.
- Market Development Activities – Affiliates conduct activities that help establish or maintain your market presence in Vermont.
Virginia
- Distribution Facilities – Affiliates maintain a distribution or fulfillment center in Virginia that facilitates the delivery of your products.
- Affiliated Entities – In-state affiliates perform activities that help establish or maintain your market in Virginia.
Washington
- Affiliated Entities – Affiliates in Washington conduct activities that help establish or maintain your market.
- Click-Through Nexus – Agreements with Washington residents who refer customers via a link, and your gross receipts from these referrals exceed $10,000.
West Virginia
- Affiliated Agreements – You have agreements with in-state affiliates who maintain a place of business.
- Market Support Activities – Affiliates perform services in connection with sales or soliciting business on your behalf.
Wisconsin
- Shared Trademarks – You use trademarks, service marks, or trade names similar to those used by an in-state affiliate.
- Market Facilitation – Affiliates use employees or facilities in Wisconsin to advertise, promote, or facilitate sales.
- Customer Services – Affiliates provide services to purchasers on your behalf.
Wyoming
- Subsidiaries – You have a subsidiary in Wyoming that advertises, solicits sales, or sells products on your behalf.
- Market Development Activities – Affiliates conduct activities that help establish or maintain your market presence in Wyoming.
Get State and Local Tax Law Support from DHJJ
Feeling overwhelmed by state-by-state affiliate nexus tax laws. Get the expert support you need to comply with tax laws and grow your interstate presence. We have financial consulting and tax services for small to mid-sized businesses that must streamline financial management to capitalize on new market opportunities. To find out when you will have an economic or affiliate nexus in a state where you’re doing business, contact us to schedule a nexus study.
