Legislation was introduced on January 23 that would adopt a click-thru nexus standard in Tennessee. The proposal, introduced by Senator Randy McNally and Representative Charles Sargent, would establish a rebuttable presumption that an out-of-state online retailer has nexus with Tennessee if the seller enters into an agreement with a Tennessee resident to refer customers to the online retailer’s website for a commission (e.g., via a link on the resident’s website). The threshold for enforcement of rebuttable presumption would be equal to the cumulative gross receipts exceeding $10,000 in the preceding calendar year from traffic routed to the online retailer’s website. The bill provides that the presumption may be rebutted by “clear and convincing evidence” that the resident with whom the seller had an agreement did not engage in any activities in Tennessee that would substantially contribute to the online retailer’s ability to establish and maintain a market in the state.
Tennessee is following the lead of Colorado, Illinois, Kansas, New York, North Carolina, Oklahoma, and Rhode Island, which have enacted click-thru nexus laws. Other states, including Arkansas, California, Connecticut, Illinois, Indiana, Iowa, and Maryland, have proposed legislation addressing click-thru nexus. While New York’s click-thru laws have been upheld by New York courts, the Illinois Supreme Court held in late 2013 that the Illinois click-thru nexus law was preempted by the Internet Tax Freedom Act, which prohibits states from imposing discriminatory taxes on electronic commerce. Questions remain as to whether the legislation is constitutional under the Commerce Clause.
The Tennessee legislation does not appear to be part of Governor Bill Haslam’s legislative package. Thus, it is unclear whether there is sufficient support for it to pass.
The attorneys of Bradley Arant Boult Cummings will be closely monitoring this legislation as it proceeds to debate in the Senate Finance and House Ways and Means Committees.