Multistate Taxation: New York’s Highest Court Upholds Click-Through Nexus Law Amid Facial Constitutional Challenge

“Click-through nexus” laws generally attribute the presence of in-state representatives who refer sales to an out-of-state retailer, including via web links, in exchange for a commission for determining sales tax nexus. See e.g., New York Tax Law § 1101(b)(8)(vi). New York was the first state to enact such a “click-through nexus” or Amazon law. Predictably, and challenged the constitutionality of New York’s click-through nexus law. After making its way through the trial court and initial appellate court, the New York Court of Appeals (the state’s highest court) recently held that the statute did not violate the U.S. Constitution on its face.

The Court found that it was reasonable to impose sales tax collection burdens on out-of-state retailer, such as and, that have effectively established an in-state sales force through affiliate programs. Despite the affiliates’ primary activity being simply posting links to the retailers’ online marketplaces, evidence in the record supported active solicitation of New York residents by the affiliates to justify the presumption that such arrangements created nexus. “The bottom line is that if a vendor is paying New York residents to actively solicit business in this State, there is no reason why that vendor should not shoulder the appropriate tax burden.”, Inc. v. N.Y. State Dept. of Tax. and Fin., 2013 WL 1234823 (N.Y. Ct. of Apps., Mar. 28, 2013).

Additionally, the opinion specified that substantial nexus would not result if the New York resident was paid merely to post passive advertisements on their website, relying upon the Department of Taxation and Finance’s published guidance that the statute is only triggered if the compensation paid to the New York resident is tied to a completed sale. N.Y. St. Dept. of Tax. & Fin. Memorandum No. TSB-M-08(3)S (May 8, 2008).

Justice Robert Smith wrote an interesting dissent whereby he concludes that the statute is unconstitutional since, based upon its literal wording, it covers online (passive) advertisements linking to the advertiser’s website. This fight may not be over as has indicated that it will likely file an appeal to the U.S. Supreme Court.