[mellie]

Posted a little while ago, the Senate in California passed Internet sales tax legislation. It now moves on to the Assembly. Bill is fast tracked due to Emergency declaration by Governor.

Assembly meets again on Monday.

It is ABX8-8 http://www.leginfo.ca.gov/pub/09-10/...ed_sen_v98.pdf

[markwelch]

Interesting to see this "clarification" added to the text of the Advertising-Nexus Tax bill, defining the types of advertising agreements that would trigger the law's grasp:

> "(C) An agreement under which a retailer purchases advertisements from a person or persons in this state, to be delivered on television, radio, in print, on the Internet, or by any other medium, is not an agreement described in subparagraph (A), unless the advertisement revenue paid to the person or persons in this state consists of commissions or other consideration that is based upon sales of tangible personal property." <

There are two major changes in this extra paragraph.

First, it expressly provides that this law applies to ALL forms of advertising, if compensation is based on sales. That means that print publications and TV channels that carry advertising where compensation based on sales WILL trigger the sales-tax collection requirement for those merchants. (It suggests that California would extend the law much more broadly than the other states that have adopted it.) This language might also bring in some lobbyists for traditional media publishers and out-of-state merchants who buy cost-per-sale advertising in these non-internet outlets.

Second, it does add the "limitation" that compensation for advertising must be based on "sales of tangible personal property," which expressly negates the broader language ("or other consideration") in the first paragraph, so that California's law could not be interpreted to include other forms of advertising (CPM, CPC, CPL, etc.). I don't think any other state has attempted to enforce the broad language to apply to those other forms of advertising.

None of these changes seek to resolve the fundamental consitutional issue, which is that the law seeks to impose "nexus" without any "physical presence," ignoring U.S. Supreme Court precedent.

from http://www.leginfo.ca.gov/pub/09-10/...d_sen_v98.pdf:

(5) (A) Any retailer entering into an agreement or agreements
under which a person or persons in this state, for a commission
or other consideration, directly or indirectly refers potential
purchasers of tangible personal property to the retailer, whether
by a link or an Internet Web site or otherwise, provided that the
total cumulative sales price from all of the retailer’s sales of
tangible personal property to purchasers in this state that are
referred pursuant to all of those agreements with a person or
persons in this state, within the preceding 12 months, is in excess
of ten thousand dollars ($10,000).

(B) This paragraph shall not apply if the retailer can
demonstrate that the person in this state 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.

(C) An agreement under which a retailer purchases
advertisements from a person or persons in this state, to be
delivered on television, radio, in print, on the Internet, or by any
other medium, is not an agreement described in subparagraph
(A), unless the advertisement revenue paid to the person or persons
in this state consists of commissions or other consideration that
is based upon sales of tangible personal property.

[emuflies]

The bill says:
----
within the preceding 12 months, is in excess
of ten thousand dollars ($10,000).
-----

Does the "preceding 12 months" mean retroactive effect, like NY did? So canceling affiliates now doesn't let the merchant off the hook?