California has enacted click-through and affiliate nexus legislation that expands the definition of a retailer engaged in business in California, effective as of June 29, 2011. The definition now includes any retailer who enters into an agreement with a person in California in which the person directly or indirectly refers potential purchasers of tangible personal property to the retailer for a commission or other consideration, whether through an internet link, website, or otherwise. Two conditions must be met for the definition to apply. First, the cumulative sales price from all of the retailer’s sales of tangible personal property in the preceding 12 months to California purchasers referred pursuant to such an agreement must exceed $10,000. Second, the retailer’s total cumulative sales of tangible personal property to California purchasers must exceed $500,000 in the preceding 12 months. Under the provision, an “agreement” does not include any agreement in which a retailer purchases advertisements from a person in California, whether on television, radio, print, internet, or by any other medium, unless the ad revenue paid consists of commissions or other consideration based on sales of tangible personal property. In addition, “agreement” does not include any agreement in which a retailer engages a person in California to place an advertisement on a website operated by that person (or another person in the state), unless the person also directly or indirectly solicits potential customers in California through flyers, newsletters, phone calls, e-mail, blogs, micro blogs, social networking sites, or other means of direct and indirect solicitation targeted specifically at potential California customers. The click-through nexus provisions do not apply if the retailer can demonstrate that the person in California with whom the retailer has an agreement did not engage in referrals that would satisfy the Commerce Clause requirements of the U.S. Constitution. In addition to the click through nexus provisions, this bill includes in the definition of “retailer” an entity affiliated with a retailer under federal income tax law within the meaning of IRC ยง1504. The term “retailer engaged in business in this state” includes any retailer that is a member of a commonly controlled group and a combined reporting group that includes another member of the group that performs services in California in connection with tangible personal property to be sold by the retailer. This includes but is not limited to the design and development of said tangible personal property and the solicitation of sales of tangible personal property on behalf of the retailer. The California State Board of Equalization (BOE) instructs businesses meeting the requirements above and who are not already registered to fill out and submit and application for a California Certificate of Registration – Use Tax. The BOE has announced that the new law does not require retailers to collect district use taxes unless they are engaged in business in the taxing districts. For an update on the status of A.B. 28, click here (Ch. 7 (A.B. 28), Laws 2011 (First Extraordinary Session), effective June 29, 2011; News Release 81-11-G, Special Notice L-284, and BOE Publication 77 Out-of-State Sellers: Do you Need To Register With California”, California State Board of Equalization, July 1, 2011, July 2011, and June 2011; News Releases 84-11-H, 85-11-H, California State Board of Equalization, July 25 and 26, 2011)