California Lawmakers Propose Use Tax Reporting Requirements for Out-of-State Retailers


California lawmakers introduced two bills last week which would require online retailers to collect and remit use tax on sales to California customers. By amending the term “retailer engaged in business in this state” in Section 6203 of the California Revenue and Taxation Code, the bills provide in relevant part that nexus exists if a retailer uses California affiliates to sell its products or if a retailer is part of a commonly controlled group of companies and one member of the group performs services in California in connection with property to be sold by the retailer.

AB 153 would create “click-through nexus” for an online retailer who forms advertising agreements with California businesses and the cumulative sales total from all of the retailer’s sales within the preceding 12 months to California customers who are referred pursuant to such agreements exceeds $10,000. The bill, similar to the “Amazon” laws enacted in New York and North Carolina, would amend the statutory definition of “retailer engaged in business in this state” for California use tax purposes to include any retailer that enters into an agreement under which a person in California, for a commission or other consideration, directly or indirectly refers potential purchasers of tangible personal property to the retailer. The California State Legislature passed a similar bill in 2009, which was vetoed by then-Governor Arnold Schwarzenegger.

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