The California Affiliate Nexus statute will take effect on Saturday September 15, 2012. This statute was originally signed into law on July 1, 2011, however after a very short period it was postponed by AB 155 for just short of a year. The year is up, and internet retailers are scrambling to become compliant.

The statute affects internet retailers who have agreements with people in the state who have links steering people to the retailers for a fee and who meet two revenue thresholds. The first threshold is that all sales under “click through” arrangements must exceed $10,000. The second threshold is that the retailer’s total sales into the state must exceed $1,000,000. The second threshold has been increased since the original effective date from $500,000 to $1,000,000. This increased threshold is allowing many smaller retailers to forgo having to register and collect the use tax. These thresholds should be examined closely prior to assuming you have to register. The actual text relating to “click through” nexus is below.

(3) A retailer is engaged in business in this state as defined in section 6203 of the Revenue and Taxation Code if the retailer enters into an agreement or agreements under which a person or persons in this state, for a consideration that is based upon completed sales of tangible personal property, whether referred to as a commission, fee for advertising services, or otherwise, directly or indirectly refer potential purchasers of tangible personal property to the retailer, whether by an Internet-based link or an Internet website, or otherwise, provided that:

(A) The total cumulative sales price of all of the tangible personal property the retailer sold to purchasers in California that were referred to the retailer by a person or persons in California pursuant to an agreement or agreements described above, in the preceding 12 months, is in excess of ten thousand dollars ($10,000); and

(B) The retailer, within the preceding 12 months, has total cumulative sales of tangible personal property to purchasers in California in excess of one million dollars ($1,000,000).

The determination as to whether a retailer has made the requisite amount of sales to purchasers in California during the preceding 12-month period shall be made at the end of each calendar quarter. A retailer is not engaged in business in this state pursuant to this paragraph if the total cumulative sales price of all of the tangible personal property the retailer sold to purchasers in California that were referred to the retailer by a person or persons in California pursuant to an agreement or agreements described above, in the preceding 12 months, is not in excess of ten thousand dollars ($10,000), or if the retailer’s total cumulative sales of tangible personal property to purchasers in California were not in excess of one million dollars ($1,000,000) in the preceding 12 months.