California Introduces Legislation to Tax Certain Internet Sales



Two bills have been introduced in the California Assembly that would, if enacted, require the collection of sales and use taxes by any retailer who enters into an agreement with a California resident under which the resident, for a commission or other consideration, directly or indirectly refers potential customers of tangible personal property, whether by a link or an Internet Web site or otherwise, to the retailer.

A.B. 27 and A.B. 178 would change the statutory definition of “retailer engaged in business in this state” to include any retailer whose cumulative gross receipts or sales price from sales by the retailer to customers in California who are referred pursuant to such agreements is in excess of $10,000 during the preceding four calendar quarterly periods. The measures specify that these provisions are inapplicable if the retailer can demonstrate that the resident with whom the retailer has an agreement did not engage in referrals in the state on behalf of the retailer that would satisfy the requirements of the Commerce Clause of the U.S. Constitution during those four quarterly periods. In addition, A.B. 27 would also change the definition of “retailer engaged in business in this state” to include any retailer who has any representative, agent, salesperson, canvasser, independent contractor, or solicitor operating in California under the authority of the retailer or its subsidiary for the purpose of servicing or repairing any tangible personal property.

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