Wednesday, California’s Governor signed a bill into law that modifies the definition of “doing business in the state” for the purposes of collecting sales tax.
The bill explicitly includes retailers
entering into agreements under which a person or persons in this state, for a commission or other consideration, directly or indirectly refer potential purchasers, whether by an Internet-based link or an Internet Web site, or otherwise, to the retailer, provided the total cumulative sales price from all sales by the retailer to purchasers in this state that are referred pursuant to these agreements is in excess of $10,000 within the preceding 12 months, and provided further that the retailer has cumulative sales of tangible personal property to purchasers in this state of over $500,000, within the preceding 12 months
Amazon responded today by terminating all of its California Affiliates.
Internet taxation by States is an ongoing conflict on many fronts, and no doubt there will be many battles that will be fought in the future.
For example, The Performance Marketing Association is currently challenging a similar law in Illinois on the grounds that it is unconstitutional.
For the meantime, the end result is that California will not be collecting any sales tax from Amazon, *and* it won’t be getting any income tax from the terminated affiliates either.
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