Click-through nexus is a sales tax rule that treats an online retailer as having a taxable presence in a state because it pays local affiliates to send customers to its website. If you compensate bloggers, influencers, or website owners in a state for referral traffic that produces sales, those relationships can obligate you to register and collect sales tax there, even without an office, warehouse, or employee in the state. Around 16 states enforce some version of the rule, with revenue thresholds ranging from zero to $100,000. The concept dates to a 2008 New York statute, and it survived the Supreme Court’s 2018 economic nexus decision in South Dakota v. Wayfair as a separate, still-active enforcement tool.
How the Rule Works
The mechanic is simple. An affiliate places a tracked link on a website, a video description, or a social post. A local shopper clicks through and buys. You pay the affiliate a commission tied to that sale. Tax authorities treat the chain as you soliciting business through an in-state representative, which is enough to create a taxable connection.
New York wrote the template in 2008. Its Tax Law presumes a remote seller is soliciting business when it enters a commission-based referral agreement with a state resident and those referrals generate more than $10,000 in cumulative gross receipts over the preceding four quarterly periods.1New York State Senate. New York Tax Law TAX 1101 – Definitions Retailers nicknamed it the “Amazon Tax.” When Amazon and Overstock.com challenged it, New York’s highest court upheld the statute in 2013, ruling it did not violate the Commerce Clause or the Due Process Clause on its face.2NYCourts.gov. Overstock.com, Inc. v New York State Dept. of Taxation and Fin. Other states passed their own versions on the strength of that decision.
What Kind of Affiliate Deal Triggers It
Not every advertising relationship counts. The line between a nexus-triggering deal and a plain ad buy comes down to three elements together:
- Commission-based pay tied to actual sales, not flat fees for ad space.
- Tracked referrals that connect a specific buyer back to the affiliate.
- Active solicitation, meaning the affiliate does more than host a banner. Product reviews, item recommendations, and embedded purchase links all qualify.
A flat-rate banner ad without tracked conversions generally does not create nexus. Tax authorities treat that as traditional advertising, closer to a newspaper ad. Once compensation is performance-based and tied to identifiable transactions, the relationship crosses into solicitation.
Influencers and Social Media
The platform doesn’t matter. A tracked purchase link in an Instagram post, a YouTube description, or a TikTok bio works the same way as a traditional affiliate link. If you pay a commission on resulting sales, and the affiliate lives in a state with a click-through nexus law, the arrangement can create a collection obligation, whether or not either side realized it. A brand ambassador posting a discount code tied to their account counts.
State Thresholds and How They’re Measured
Each state sets its own dollar figure. The most common threshold is $10,000 in cumulative gross receipts from affiliate referrals, used in New York, Illinois, Minnesota, Nevada, New Jersey, North Carolina, Tennessee, and Vermont.1New York State Senate. New York Tax Law TAX 1101 – Definitions Others diverge:
- Rhode Island sets the threshold at $5,000.
- Georgia and Louisiana require $50,000 in referral receipts.
- Connecticut sets the highest bar at $100,000.
- Pennsylvania has no minimum. Any commission-based referral agreement with a resident can trigger the obligation.
Measurement windows differ too. Some states use a rolling 12 months. New York uses quarterly periods ending the last day of February, May, August, and November.1New York State Senate. New York Tax Law TAX 1101 – Definitions Revenue from all affiliates in a state is aggregated, so five affiliates each producing $2,500 in New York sales collectively push you past the $10,000 line. Track referral revenue by state on a running basis, because the obligation starts the moment you cross.
How It Differs From Economic Nexus and Marketplace Rules
After Wayfair, every state with a sales tax adopted economic nexus, which requires collection once a remote seller exceeds a volume threshold, typically $100,000 in revenue or 200 transactions. The rules target different activity. Economic nexus looks at total sales volume. Click-through nexus looks at marketing relationships. A retailer doing $40,000 in total sales into a state falls well below the economic nexus threshold but can still be pulled in if $10,000 of that came through local affiliates. That gap is the point of the rule.
You can trigger both at once. When you exceed the economic threshold and also run an affiliate program in the state, economic nexus is what matters practically, because you would already be registered. Click-through nexus is the concern when your overall state sales are modest but your affiliate-driven sales are not.
Marketplace facilitator laws are a separate layer. If you sell through Amazon, Etsy, Walmart Marketplace, or similar platforms, the marketplace is generally required to collect and remit sales tax on those transactions. That coverage stops at the platform boundary. Sales through your own website or checkout are not covered, and if you use affiliates to drive that direct traffic, click-through nexus can still apply. Inventory stored at a third-party fulfillment center creates its own physical-presence nexus in the warehouse state, regardless of channel.
Rebutting the Presumption
Click-through nexus is unusual in that the presumption of nexus can be rebutted. In states following the New York model, if you can prove your in-state affiliate did not actually engage in solicitation meeting constitutional nexus standards during the relevant period, the presumption falls away.1New York State Senate. New York Tax Law TAX 1101 – Definitions
In practice this means written statements or affidavits from affiliates confirming they did not solicit customers in the state on your behalf. Evidence that an affiliate’s site targets a national audience and took no state-specific actions can support the rebuttal. The burden is entirely yours, the standard is demanding, and vague assurances will not carry it. Most sellers find registering easier than building the file, which is what the states expected.
Complying Once You’ve Crossed the Line
Compliance follows a predictable sequence:
- Register for a sales tax permit with the state’s department of revenue. Registration is usually free, though a handful of states charge up to $100 or require a refundable security deposit.
- Determine taxability for what you sell. Clothing, groceries, software, and digital goods are treated differently across states. Get this settled before you start collecting.
- Configure your checkout to charge the correct rate for each buyer’s location, including any local surtaxes.
- File returns on the schedule the state assigns, whether monthly, quarterly, or annually. File even in zero-sale periods. Missing a return draws penalties whether or not tax was owed.
- Remit collected tax by the return due date. Holding collected sales tax in your operating account and spending it is one of the fastest routes to serious legal exposure.
Some sellers take the other route and end affiliate agreements in a state rather than register. No commission-based referral agreements with residents means no click-through nexus. Overstock.com and other large retailers cut affiliate programs in certain states when the laws first passed. That works only if you also fall below the state’s economic nexus threshold. Otherwise you owe the tax regardless of what you do with the affiliate program.
Audits, Records, and Penalties
Auditors verifying click-through nexus want to see your affiliate contracts, payout records, referral tracking data, and the geographic location of each affiliate. They’re checking two things: whether the agreements created nexus, and whether you identified the date you crossed the threshold correctly.
Most states can look back three to four years in a sales tax audit. Iowa’s lookback extends to five years, and Texas, Michigan, and Maryland use four-year windows.3Multistate Tax Commission. Lookback Periods for States Participating in National Nexus Program Where a state believes income went unreported, the window can expand. Keep affiliate agreements, commission reports, and sales data for at least the longest potential audit period in any state where you have affiliates.
The financial exposure runs well past the uncollected tax. State interest on unpaid sales tax runs roughly 3% to 18% annually depending on jurisdiction, and many states tie the rate to the federal prime rate and adjust periodically, so the cost compounds unpredictably. Penalties for late filing, late payment, or failure to register stack on top. Some are flat percentages of the tax owed; others escalate the longer you go without filing. A seller who ignored click-through nexus for several years can face back taxes, interest, and layered penalties that together dwarf the original tax.