Just as several times before in United State Supreme Court jurisprudence, a brief and simple statement can garner a great deal of analysis and debate. Recently, as part of his concurring opinion in Direct Marketing Association v. Brohl, Justice Kennedy commented that the Court’s 1992 Quill v. North Dakota, 504 U.S. 298 decision is ripe for reevaluation. As evidenced by its newest Rule (Ala. Admin. Code 810-6-2-.90.03), it appears Alabama has grown impatient. The Rule, in short, disregards Quill’s physical presence nexus standard for sales and use tax purposes. Effective for transactions occurring after 1/1/2016, the new Rule will require out-of-state sellers to register, collect and remit sales tax if:
- The seller’s retail sales of tangible personal property sold into Alabama exceed $250,000 per year based on the previous calendar year’s sales; and
- The seller conducts one or more of the activities described in Ala. Code § 40-23-68 (which sets out a series of wide reaching in-state activities involving ownership of property, the presence of representatives, the qualification/authorization to do business, direct advertising, or franchising/licensing activities).
The above Rule establishes an economic nexus presence standard for sales tax. Clearly, Alabama is attacking Quill’s physical nexus presence standard head on (even though Quill is still, technically, good law)! Only time will tell how this will play out in the courts. In the meantime, out-of-state sellers should evaluate their Alabama-destined sales, be prepared to comply with the Rule, and consider filing protective refund claims.
The Rule can be found here: https%3A%2F%2Frevenue.alabama.gov%2Frules%2F810-6-2-.90.03.pdf&usg=AFQjCNE0uDNQY6K4e2Fi8ODHGB0Fpj-6yQ