California Affiliate Tax Becomes Law

Support Small Business Oppose California BillIf you're an affiliate marketer living in California you could be losing a lot of your vendors, as Governor Jerry Brown has signed the state's budget, which includes the affiliate nexus tax.

The Performance Marketing Association, which has been fighting against the tax, said: "If you are a California-based publisher, or an out-of-state advertiser, please seek immediate advice from a tax or legal professional."

The so-called "Amazon Tax" has seen vendors drop affiliates based in states where this tax has been made law. The PMA is currently challenging the tax in Illinios and was one of the leaders trying to have it unattached to the California budget.

In 1992, the U.S. Supreme Court ruled in Quill Corporation v. North Dakota that states can compel tax collection from companies with a physical presence in their state - this connection is termed a nexus.

In March, Amazon told California tax officials that "it will cut ties with thousands of California affiliates if the state passes pending legislation requiring the online retailer to collect sales tax from California customers," Internet Retailer reported.

The loss of Amazon would slash 50 percent from the expected income from the tax, state tax officials estimate.

"These bills would provide no new tax revenue collected by Amazon or others who sever their relationships with California-based advertisers," Paul Misener, Amazon's vice president for global public policy, says in a letter to Senator Runner, adding: "California consumers would still be able to purchase online at from Amazon's retail business, so these bills would only deny California-based organizations and individuals the advertising fees they currently receive from out-of-state retailers and, ironically, Californiaís general fund could suffer a net loss in revenue as affiliates pay less income tax or move out of the state."

The law went into effect immediately upon signing. California is the leading state for affiliate marketers.

About the author

Frank Watson has been involved with the Web since it started. For the past five years, he headed SEM for FXCM -- at one time one of the top 25 spenders with AdWords. He has worked with most of the major analytics companies and pioneered the ability to tie online marketing with offline conversion.

He has now started his own marketing agency, Kangamurra Media. This new venture will keep him busy when he is not editing the Search Engine Watch forums, blogging at a number of authoritative sites, and developing some interesting online community sites.

He was one of the first 100 AdWords Professionals, a Yahoo and Overture Ambassador, and a member or mod of many of the industry forums. He is also on the Click Quality Council and has worked hard to diminish click fraud.