Recently, California Gov. Jerry Brown, approved a new law that forces online retailers to collect California sales taxes by expanding the definition of what it means to have a physical presence within the state. Prior to the law, online retailers only had to charge sales tax when they had an actual physical presence such as a warehouse or retail outlet in the state. The new law now recognizes a business as having a physical presence in the state if they have affiliates promoting their products in state. Of course mega online retailers such as Amazon.com and Overstock.com are up in arms and are challenging the decision, but in the meantime they have cut all affiliate ties with their affiliates in California.
So how does this affect you?
Well, if you currently offer an affiliate program and you have affiliates promoting your products within the state of California, then this law essentially means that you are now recognized as having a physical presence in the state. By having a physical presence in the state, you may now be saddled with sales tax responsibilities to that state.
I am certainly not a tax expert, but as an online marketing strategist, I understand the importance of affiliate marketing and what it can mean to your bottom line. When I saw this video article on Jessica Matthews’ “Bite of Brilliance” I knew I needed to pass along the information to my peeps.
If you currently have an affiliate program or are thinking of implementing one, I strongly recommend that you check in with your Accountant or Tax Specialist ASAP to ensure that the terms of your currently affiliate program do not cause you additional tax liabilities.
