California Law Would Emulate Fresh York Affiliate Tax

California would extend sales tax collection to many online merchants.

As state governments get strapped for cash, expect them to extend the reach of existing taxes.

NYAffiliateVoice notes regarding a fresh proposed law in California that is similar to a Fresh York tax law. Fresh York’s law requires online merchants such as Amazon.com to collect Fresh York sales tax if it has any affiliate program members in the state. Fresh York basically extends its tax collection nexus beyond the traditional meaning of having actual operations in a state.

The proposed California law, California Bill 178, is similar:

Any retailer entering into an agreement with a resident of this state under which the resident, for a commission or other consideration, directly or indirectly refers potential clients of tangible personal property, whether by a link or an Internet Web site or otherwise to the retailer…

California is the center of internet commerce, home to some of the biggest internet brands and affiliate networks. It’s also the world’s 7th biggest economy as stated by the California Department of Finance.

Technically, residents of California are by now required to pay tax on purchases made over the internet. But the fresh law would require merchants to calculate and pay the sales tax.

When Fresh York’s law went into effect many merchants dropped Fresh York affiliates. This had the perverse affect of lowering the income of many Fresh York residents or forcing them to leave the state, ultimately lowering income tax payments to Fresh York. But if both Fresh York and California impose these rules, expect wholesale changes in the way firms handle affiliates.

[Thanks Joe for the tip.]