Authored by Assemblyman Charles Calderon, AB 155 adds and repeals section 6203 of the Revenue and Taxation Code, and takes effect immediately. As readers may recall, back in June, Governor Brown signed ABX1 28, which expanded the definition of “retailer engaged in business in the state” to include: (1) retailers that are a member of a commonly controlled and combined reporting group where one of the other members performs services in California related to the retailer’s sale of tangible personal property; and (2) retailers entering into agreements under which a person in California refers – via the Internet – potential purchasers to the retailer and receives a commission therefore, provided the retailer’s sales to persons in California resulting from referrals and in the aggregate exceed $10,000 and $500,000, respectively, within the preceding twelve months. Thus, under ABX1 28, many online retailers with no physical presence in the state were required to collect sales tax from California customers if their “affiliates” had some sort of physical presence. Almost immediately after that bill was signed, however, Amazon cut off ties with thousands of its affiliates based in California, and a coalition of online retailers initiated an effort to overturn the bill by a statewide referendum.
Thus, AB 155 emerged as a compromise bill, which, in exchange for the retailers’ promise to drop their referendum effort, allows online retailers a one-year reprieve from the requirement to collect sales tax. Under the bill, if no federal nexus provision is enacted by July 31, 2012, then the revision to the original nexus provisions of Section 6203 (i.e., the provisions of ABX1 28) will be reenacted. Indeed, even if a federal nexus provision is enacted by July 31, 2012, if California fails to implement the federal law by September 14, 2012, then those new provisions will still be reenacted.
Although proponents of AB 155 maintain that it will bring thousands of jobs and hundreds of millions of dollars to California, and that Amazon will reignite its affiliate program, permanent change seems dependent on a Congress that recently has shown little propensity to act. Thus, we may be reporting next summer that the questionable new nexus provisions of ABX1 28 are on the verge of reenactment.
When Governor Brown signed ABX1 28 on June 29, 2011, many out-of-state retailers who have no physical presence in California expressed concerns about the law’s constitutionality. If those provisions are reenacted, it would seem that a legal challenge may be warranted.