Effective January 1, 2004, California state departments and agencies may contract only with vendors, contractors, or affiliates of vendors or contractors who are registered for sales and use tax purposes with the State of California. When offering a contract to a vendor, contractor, or affiliate, California state departments or agencies are required to collect from that vendor, contractor, or affiliate the appropriate certificate or proof of registration. Exemptions to this provision apply in the case where the contract qualifies as “necessary to meet a compelling state interest.” (Sec. 10295.1, California Codes, effective as noted above.)