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Oct 2011: California Imposed Moratorium On Internet Retailer Nexus Law

California imposed a one-year moratorium on its "Amazon Law" which required online retailers to collect and remit sales tax starting July 2011. The new law delays the start date to September 2012. The Amazon Law expanded sales tax obligations for out-of-state online retailers that had over $500,000 in annual sales to California residents or used affiliate marketing programs generating over $10,000 in sales. Unless ruled unconstitutional or replaced by federal law, companies like Amazon will have to collect sales tax starting September 2012.

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97 views2 pages

Oct 2011: California Imposed Moratorium On Internet Retailer Nexus Law

California imposed a one-year moratorium on its "Amazon Law" which required online retailers to collect and remit sales tax starting July 2011. The new law delays the start date to September 2012. The Amazon Law expanded sales tax obligations for out-of-state online retailers that had over $500,000 in annual sales to California residents or used affiliate marketing programs generating over $10,000 in sales. Unless ruled unconstitutional or replaced by federal law, companies like Amazon will have to collect sales tax starting September 2012.

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SingerLewak
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CALIFORNIA IMPOSED MORATORIUM ON INTERNET RETAILER NEXUS LAW

TAX BRIEF

October 2011
On September 23, 2011, California Governor Jerry Brown signed Assembly Bill (AB) 155 into law, which imposes a one-year moratorium on the states Amazon Law enacted earlier this year. The new law, effective immediately, pushes the date on which on-line retailers must begin collecting sales tax back to September 2012. The Amazon Law was originally enacted on June 29, 2011 as part of the 2011-12 State Budget Act (A.B. 28x), which revised California (CA) Sales and Use tax nexus provisions and expanded the sales and use tax obligations of out-of-state on-line retailers to include collecting and remitting taxes on the sales of tangible personal property to California residents beginning on July 1, 2011. Implications for Remote Retailers Unless the law is ruled unconstitutional or federal legislation is introduced which prohibits a state from imposing a collection obligation, companies like Amazon.com or other out-of-state on-line retailers, which rely on affiliate associate programs, will be required to collect and remit Sales and Use tax starting September 2012. California New Affiliate Nexus Law Prior to the moratorium, the law required out-of-state on-line retailers who (1) have cumulative sales greater than $500,000 worth of tangible personal property to CA residents within the prior 12-month period and (2) engage in business in CA through the use of affiliate advertising agreements that have generated sales in excess of $10,000 in the last 12 months, to collect and remit sales and use tax on sales made within California. An affiliate is a person who, directly or indirectly, refers and solicits potential purchases of tangible personal property to the on-line retailer in California through the use of internet-based links, websites, flyers, newsletters, telephone calls, blogs, electronic mail, social networking sites, or other means. If you are an outof-state remote retailer and believe your business activities fall within the scope of the new Amazon law, please do not hesitate to contact us so that our State and Local Tax Team may assist you in formulating immediate and long-term solutions for your business, as well as, assist in determining whether exemptions might apply.

Thank you for your time and continued support of the Enterprise Zone program As always, please call if you would like to discuss any of these items further. Your Tax Partners, Mark G. Cook, Partner Steven J. Cupingood, Partner Todd Northrup, Partner Javier Ramirez, Partner Richard A. Linder, Partner David Neighbors, Partner Don G. Leve, Partner Thomas E. Wendler, Partner Jon Widdowson, Partner Michael Wu, Partner Dan B. Faulk, Partner

IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this communication (including attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing or recommending to another party any matters addressed herein. Notice: Opinions, conclusions, and other information in this message are not intended to represent recommendations or advice to you or any other person. Each persons circumstances are unique, and we strongly suggest you discuss your specific situation with your professional advisor before taking any action based on the information herein or information to which this message refers.

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