A California bill, AB 178, will, according to Assemblywoman Nancy Skinner, D-Berkely, close a loophole in California tax law which has allowed out-of-state companies to avoid collecting California sales and use tax. She says that “During this unprecedented fiscal crisis we cannot afford to lose sales tax revenue from out-of-state companies when our own local businesses are struggling to keep their doors open.” AB 178 is modeled closely after a New York law and, according to Skinner, is expected to raise approximately $55 million in revenue per year.
But performance marketers, including the Performance Marketing Alliance, are saying that it unfairly categorizes publishers as sales presence for out-of-state advertisers. This means taxes will be levied on out-of-state advertisers, potentially causing them to shut down their publisher relationships in the state, which apparently happened in New York.
I would be hard press to believe Gov. Arnold Schwarzenegger would back this bill,
and I’m assuming that it is considered raising taxes, which would then need a 2/3 vote. A majority is needed. Here is the proposed wording:
5) 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 customers of
tangible personal property, whether by a link or an Internet Web site
or otherwise, to the retailer, if the cumulative gross receipts or
sales price from sales by the retailer to customers in this state who
are referred pursuant to these agreements is in excess of ten
thousand dollars ($10,000) during the preceding four calendar
quarterly periods. This paragraph shall not apply if the retailer can
demonstrate that the resident with whom the retailer has an
agreement did not engage in referrals in the state on behalf of the
retailer that would satisfy the requirements of the commerce clause
of the United States Constitution during the four quarterly periods
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