If you're an out-of-state merchant with affiliates in California, then read on.

Governor Jerry Brown is wasting no time in continuing the "governator" role by exploding the affiliate industry there, with the passing of budgetary law which affects the collection of sales tax by retailers who have California affiliates.

According to Shawn Collins' latest blog post here,

"The affiliate nexus portion of the budget forces out-of-state retailers to collect California state sales tax for Internet sales, based on the view that affiliate marketers constitute a tax nexus for the retailers.

The immediate reaction by countless online retailers, in what promises to be a huge list, is that they will remove the affiliates of California from their affiliate programs, so they still do not assume a tax nexus."

And the fallout is already starting with Amazon, who has one of the world's largest affiliate programs in the world. This post summarizes Amazon's latest letter to affiliates (known as associates).

If you think this will affect your affiliate programme or your entire business, I suggest you contact your accountant and lawyer to assess the risks and costs associated with having affiliates promoting you in California.

This is not some simple virtual issue.

Retailers (like Amazon) may drop their CA affiliates and lose that added traffic.

Recently, some large affiliate marketing companies have actually MOVED away from their home state, due to similar laws already passed in those states which would have meant a loss of business with the merchants they were promoting. Ref: FatWallet - see video here:

Oh and you might also want to join/donate to the Performance Marketing Association, who is trying to fight these insane laws on behalf of affiliates and online merchants.

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--- (Edited on 6/29/2011 7:34 pm [GMT-0500] by Peter) ---