The interstate commerce clause of the constitution and subsequent case law establishes that one state may not tax the businesses of another unless it has a physical presence ("a nexus") in it's state.
California and a number of other states are attempting to redefine nexus more broadly in an attempt to be able to force eg Amazon to collect sales tax from it's residents. Amazon has established that they would rather stop doing business with CA affiliates than (effectively) raise prices.
This should matter to you because affiliates are just the tip of the iceberg. One of the California proposals already contemplates that having subsidiaries, servers or _vendors_ in CA would establish a nexus. So let's say you're the entrepreneurs behind CloudKick (to use an already exited example from Y Combinator.) If these proposals had been law when they were looking for customers, they would have found many customers concerned that using CloudKick would obligate them to collect sales tax from their customers in California. Collecting the taxes would of course only be part of the issue - computing when and how much to collect in accordance with the latest version of the law in every state would be a significant burden.
The states of course are perfectly entitled to seek new revenue, especially in times of economic distress. However we believe lawmakers should stick to strategies that work. Historically these laws have resulted in _reduced_ tax revenue and job flight. (the merchants cut ties with affiliates in those states and the affiliates either move or cease operation.) They also make investment in these kinds of business models more challenging. For a state as dependent as California on innovation, we think this is just bad public policy. (Also the Performance Marketing Association has filed suit against the state of Illinois arguing that it's affiliate tax law is unconstitutional.) The correct place for this to be taken up is at the federal level since the federal government actually does have the right to impose taxes on interstate commerce. Senator Durbin of Illinois has announced he intends to introduce legislation to address this federally in the fall.
If you're still reading and you're motivated to do something, check out http://25000businessesatrisk.com/ for California or http://performancemarketingassociation.com/nexus-tax for the rest of the country.
Oliver Roup Founder / CEO, VigLink