California Delays Implementation of Remote-Seller Nexus Law

California Governor Edmund Brown has signed new legislation that delays the implementation of click-through and affiliate nexus provisions that were enacted earlier this year (under A.B. 28). Under the new law, the enactment of the click-through and affiliate nexus provisions is conditional on federal authorization for states to require sellers to collect taxes on sales of goods to in-state customers regardless of the seller’s location. Effective retroactively to June 28, 2011, the new law restores the definition of a “retailer engaged in business in the state” to the definition that was in place before A.B. 28 was enacted.

Under the new law, the nexus provisions of A.B. 28 are reenacted and made effective on September 15, 2012 if federal authority is not enacted on or before July 31, 2012. Alternately, the provisions will be effective on January 1, 2013 if federal authority is enacted on or before July 31, 2012 but California doesn’t elect to implement the federal law on or before September 14, 2012. The legislation doesn’t specify what the operative date would be if federal authority is enacted by July 31, 2012 and California implements it by September 14, 2012.

The new law also increases the threshold for the click-through nexus provisions. The threshold is raised from $500,000 in total sales in California (outlined in A.B. 28) to $1 million. Click here for more details on the enactment of A.B. 28.

This bill was in reaction to a petition for a state wide challenge to repeal the original bill. If the efforts had gained enough signatures and been submitted by the deadline, it would have been placed on a state-wide ballot in the next general election. (A.B. 155, as enrolled and sent to the governor on September 14, 2011, effective September 23, 2011; Press Release, Office of the California Attorney General, July 18, 2011; Referendum, Initiative and Referendum Qualification Status, California Secretary of State, July 18, 2011; News Release 83-11-H, California State Board of Equalization, July 18, 2011)

UPDATE: California repealed its click-through and affiliate nexus provision when it passed its economic nexus legislation, A.B. 147, effective April 1, 2019. For more information on the state’s economic nexus legislation, you can read our news item.

Posted on October 24, 2011