Here is the latest stance from LinkShare regarding its policy with its California publishers, regards the July 1, 1011 tax law. Critical Interpretations is glad that LinkShare is not going the way of Amazon, i.e. not severing its relationships with its advertisers.
California Tax Law and Affiliate Nexus
Frequently Asked Questions
Jul 01 2011
Below are some frequently asked questions about the recently passed California tax law related to Affiliate Nexus. Also here are some other helpful sources of information are:
Performance Marketing Association
LinkShare Internet Tax Page
Recorded Web Seminar on Internet Tax Legislation
This Web seminar was recorded prior to the California law being passed but it contains some great background on the various laws being passed in various states.
We’ll bring you more information as it becomes available moving forward.
Scott Allan
Vice President of Marketing
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California Tax Law and Affiliate Nexus
Frequently Asked Questions
When did California approve an Affiliate Nexus tax?
The Governor signed the bill into law on Wednesday, June 29, 2011.
When does the law take effect?
The law takes effect Friday, July 1, 2011.
Where can I find the full text of the law?
Click here to read the full text of the law
What does California require of Advertisers who are not otherwise required to collect sales tax?
The law requires Advertisers to collect sales tax under certain circumstances, including those Advertisers working with Publishers in California if both of the following conditions are met: 1) total sales through your Publishers in California is $10,000 or more in the previous 12 months and 2) total sales in California is $500,000 or more in the previous 12 months through all channels collectively.
Does the law apply to both U.S. and non-U.S. Advertisers?
Yes the law applies to both U.S. and non U.S. Advertisers. All Advertisers should consult with their Tax Attorneys on this question as each Advertiser’s situation is different.
What is LinkShare’s stance on the California tax related to Affiliate Nexus?
In general LinkShare does not take official positions on specific laws passed by states as Affiliate Nexus is often just one aspect of the overall legislation that is passed. Some third parties have suggested that Affiliate Nexus laws in various states have been shown to hurt small businesses when Advertisers decide to terminate Publishers from their Affiliate Marketing programs which could then have the unintended effect of decreasing tax revenues.
What does California require of Publishers?
The law does not require anything of Publishers. Any duty to collect sales taxes is on the Advertiser.
Can Publishers move to avoid being removed from an Advertiser’s program?
LinkShare cannot say definitively if moving would eliminate any risk that a Publisher would create tax nexus for an Advertiser in California as every Publisher’s situation is different. There have been widely publicized cases of Publishers moving when such laws are passed, including in Illinois. Publishers should consult with their Tax Attorneys on this question.
What are the possible courses of action for Advertisers?
Advertisers should consult with their Tax Attorneys on this question as each Advertiser’s situation is different.
Which Advertisers in the LinkShare Network will remove Publishers from their program as a result of California passing an Affiliate Nexus tax?
Since the law was just recently passed, it is unclear at this point in time what course of action LinkShare Advertisers will take.
Are Advertisers that have a presence (a store, a warehouse, an office) in California impacted by this new Affiliate Nexus law?
No. Advertisers that have a presence in California should already be collecting sales tax.
If an Advertiser removes Publishers from California, could it let them back in if it decides to start collecting the tax at a later date?
Yes, the LinkShare system will easily allow the Advertiser to approve its California-based Publishers back into its program at any time.
Why don’t Advertisers that meet the thresholds just collect the tax instead of removing their California-based Publishers?
Advertisers may have a variety of reasons for not wanting to collect the tax. One example could be that their e-commerce systems are not easily changed to accommodate collecting the tax.
What are the risks for Advertisers that meet the sales thresholds but do not collect the tax?
LinkShare cannot advise Advertisers on what the risks might be in not collecting the tax. The California tax authority, for example, may audit companies that should be collecting this tax and might apply fines and interest to those that are in violation of the law.
Can Advertisers and Publishers work out a Cost-Per-Click (CPC) or Cost-Per-Thousand Impression (CPM) relationship to avoid paying California’s Affiliate Nexus Tax?
LinkShare cannot say definitively how the California tax authority would view such arrangements. Advertisers and Publishers should consult their tax attorneys for advice about their specific situations.
Does the law apply to both tangible and intangible goods?
The law states that it applies to the sale of tangible goods. If in doubt about whether a good or service meets California’s definition of “tangible,” Advertisers and Publishers should consult with their tax attorney.
