Taxcient’s Sales and Use Tax Blog

 
Recently enacted legislation has amended the Tax Law to expand the definition of a sales tax vendor to include, under certain conditions, out-of-state sellers (remote affiliates) of taxable tangible personal property or services that are affiliated with businesses in New York (New York affiliates). This amendment is effective June 1, 2009, and applies to sales made or uses occurring on or after that date.

Under the new law, a New York business and an out-of-state seller are affiliated with each other if one owns, directly or indirectly, more than five percent (5%) of the other or if more than 5% of each person1 is owned, directly or indirectly, by the same person or by an affiliated group of persons.

The conditions that require an out-of-state seller to register as a sales tax vendor are: (1) A New York affiliate who is a sales tax vendor uses a trademark, service mark, or trade name in New York that is the same as that used in New York by the remote affiliate, and (2) A New York affiliate engages in activities in New York that benefit the remote affiliate in its development or maintenance of a market for its goods or services in New York, to the extent that those activities are sufficient for the remote affiliate to satisfy the nexus requirement of the United States Constitution.

For purposes of determining whether Condition 2 is met the New York Department of Taxation and Finance will consider whether the direct or indirect ownership exceeds fifty percent (50%). Out-of-state sellers that meet the sales tax vendor expanded definition must register with the Tax Department and obtain a Certificate of Authority prior to June 1, 2009. (New York Department of Taxation & Finance Publication TSB-M-09(3)S, 05/06/2009).

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