The new job killiing California law that claims that affiliates (independent businesses that advertise products on a pay for performance basis) create sales tax nexus for out of state retailers and therefore subjects them to collecting sales tax, continues to claim victims.
While the focus has been on Amazon, more companies are terminating their relationships with 25,000 small businesses here in California. The law is intentionally vague and given that there are networks and sub-networks of affiliates it is very difficult for a company to see if their relationships with advertising networks or affiliates causes the nexus to kick in.
To avoid the risk, out of state retailers are choosing to do the simplest thing and that is to fire their California small business affiliates. That means less revenue for small businesses, more people getting fired and less income tax collected by the State. And, no extra sales tax to compensate. Way to go Sacramento.
Here is the most recent termination letter I have seen:
Thank you for your participation in the Total Gym Affiliate Program in the Google Affiliate Network. We greatly appreciate all of the hard-work and effort you have put forth to make our program a success. Unfortunately, due to recent state legislation in California, we are forced to remove all affiliates located in the state.
Today, June 29, 2011, your account was expired from our Google Affiliate Network program. Thus, we urge you to take down all banners, text links, etc. from your sites immediately.
Please note, if the location of your business changes, please feel free to reapply to our program.
If circumstances do change, we will notify you. We sincerely wish you the best in all of your future endeavors.
The Total Gym Affiliate Team