Hawaii – Click-Through and Affiliate Nexus Bill Pre-filed

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SALT Report 1347 – The Hawaii House of Representatives has pre-filed a bill that includes use tax click-through nexus and affiliate nexus provisions. Under H.B. 1694, a person “engaged in business in the state” would now be considered a “seller” and that would include any entity affiliated with the seller, that has established substantial nexus with Hawaii and upon whom federal law permits the state to impose taxes.

Click-Through Nexus

A seller engaged in business in Hawaii would include any seller that has entered into an agreement with a person in Hawaii, for a commission or other consideration, and directly or indirectly refers potential customers to the seller, either through an Internet link or an Internet Web site, or otherwise, provided that:

  • The total cumulative sales price from all of the seller’s sales within the preceding 12 months to purchasers in Hawaii that were referred pursuant to an agreement with a person in the state are in excess of $10,000; and
  • The seller, within the preceding 12 months, has total cumulative sales of tangible personal property to purchasers in Hawaii in excess of $1 million
If the legislation is enacted use tax collection requirements would not apply to a seller engaged in business in Hawaii if the seller can demonstrate that the person in the state with whom they have an agreement did not engage in referrals in the state on behalf of the.
Affiliate Nexus
A seller engaged in business in Hawaii would include any seller that is a member of a commonly controlled group that includes another member that, pursuant to an agreement with or in cooperation with the seller, performs services in Hawaii related to the tangible personal property sold by the seller. This would include the design and development of tangible personal property sold by the seller, or the solicitation of sales of tangible personal property on behalf of the seller.
If passed, these laws will take effect on July 1, 2013 unless pre-empted by federal law.
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