The bill is an attempt to extend the definition of nexus significantly; nexus means you as a merchant have to collect sales tax on transactions in any state where you have it.

The biggest example is Amazon.com does not collect California sales tax as they have no presence here. The bill would make pretty much any electronic presence, representation or relationship qualify as nexus, thus requiring Amazon.com to collect sales tax.

Now, a lot of politicians like this idea and it is usually pushed by a coalition of small retail businesses that have a burr up their...yeah. The original legislation focused on affiliate marketers as the nexus. Illinois just recently passed a law targeting affiliates for this as well.

What happens however is the merchants end their relationship with affiliates in the affected state. The law is not designed to be enforced because the wording makes it impossible to truly determine if an affiliate in the state was involved. The end result is affiliates leave the state or are cancelled by the merchant.

What makes this law beyond the pale is the attempt to define nexus as almost any manner of electronic represenation or presence. If you have an ecommerce company and are not in CA, but your web host has your files in a CDN in the state, you get to collect sales tax -- on any transaction involving the CDN server in CA. Pretty much a technical hurdle no one can cross. It goes further by making the definition so broad that the CA board of equalizaion can determine that nexus exists at any time for any reason.

So yeah, hope that helps. It is pretty nuts and I'm meeting tomorrow with the senator that sponsored it. Wish me luck!

Yes, instead of applying the physical presence test for sales tax, SB 234 would apply a substantial nexus test. The opponents argue that this would require Amazon to collect sales tax if it maintains its Affiliates program, as they are arguably resellers/referrers located within California.