On June 28th, California governor Jerry Brown signed into law a nexus tax law (ABX 1-28) aimed at online retailers doing business in California. Almost overnight, this new law shut down countless affiliate marketers who work from home selling products from online retailers such as Amazon.com. The law’s intention was to quell the complaints from small businesses that operated traditional “brick-and-mortar” storefronts and couldn’t compete with the low prices of their online equivelents. Adding to this the fact that online retailers could run their operations in states that charge lower taxes for business, retailers like Amazon could sell goods to California residents at lower prices than anyone else.
For as long as California has been collecting taxes on businesses, the law stated that any business operating within the state that had a physical presence there would be subjected to state taxes. When online retail took off, companies were able to skate around this law by simply not have a physical presence in the state. The new law was to close that loophole and essentially define California-based affiliates as the “physical presence”. While this may have been a huge sigh of relief for local small businesses, it dealt a heavy blow to the thousands of affiliates who depend on commission sales for a large portion of their income.
Of course, Amazon was opposing this law from the start and over time has contributed over $2 million to have it repealed. It appears that this day has finally come. Now that Governor Brown has signed the repeal, here is how the process will work:
- The California affiliate nexus provisions of ABX 1-28 enacted on June 28 are repealed and no longer of any effect, and also will not be enforced with respect to the period from June 28 through the effective date of AB 155 (i.e., the date Governor Brown signed the bill);
- If no federal legislation is adopted over-ruling Quill before July 31, 2012, then the California affiliate nexus provisions (as re-stated in AB 155, with one important change, noted below) will become law on September 15, 2012;
- If federal legislation overturning Quill is adopted by July 31, 2012, and California does not implement the requirements of such a federal law by September 14, 2012, then the California affiliate nexus provisions (again, as restated in AB 155, with the change noted below) take effect January 1, 2013;
- If federal legislation over-turning Quill is adopted by July 31, 2012, and California implements the requirements of such a federal law by September 14, 2012, then the affiliate nexus provisions of AB 155 will NOT take effect.
My two cents
As a former and now current Amazon affiliate marketer, I am all for this repeal and hope it remains permanent. After all, Amazon has been fighting this battle for some time now when other states have enacted similar laws and received no major positive results. In fact, those states reported more bad than good. California’s attempt at finding new revenue streams has failed in this case and as a marketer myself and online shopper, I applaud their efforts and hope that California will never look at this law again.