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News Brief: Affiliate Nexus Tax Reinstated in California and Pennsylvania

Aug 22, 2012
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The PMA announced this morning that the Affiliate Nexus Tax will be reinstated in Pennsylvania as of September 1, 2012, and in California as of September 15, 2012. Rebecca Madigan, President of the PMA wrote in a post about Pennsylvania’s tax stating that the PMA is working with Pennsylvania to clarify the ambiguous and vague statute. The PMA confirmed that they’re pursuing clarification regarding what ad types contribute to nexus.

Madigan also wrote about California’s nexus tax:

The state had suspended the law to give us time for passage of federal legislation (which has not yet happened).

The PMA has been working closely with the Board of Equalization, the agency that oversees sales and use tax collection. The BOE has developed a work-around process that will allow affiliate relationships to remain in place, under certain circumstances. Modeled after similar regulations developed in New York, advertisers can still work with California publishers and not have nexus established, if their publishers agree to avoid certain marketing activities that are deemed ‘solicitation’ or directly targeting California consumers. This means publishers are not allowed to send emails to Californians, distribute fliers, or verbally inform people to visit advertisers’ sites.

The regulation can be found on the BOE website.

The regulation goes into effect August 26, 2012. However, instructions on compliance have not yet been released. Per the regulation, advertisers must include specific instructions in their advertiser agreements that explicitly prohibit these marketing practices. And publishers must annually commit via affidavit to avoid these practices.

These moves on the part of Pennsylvania and California seem to confirm that they have little confidence that national sales and use tax reform will happen any time soon. Between an election and a possible lame duck session to tackle a “fiscal cliff,” this reform appears to be firmly on the back burner for the foreseeable future, an unfortunate turn of events for frustrated affiliates.

Filed under: News Briefs
  • Rebecca Madigan

    Thank you for posting this information but I do want to counter the comment that this reflects on the situation with federal legislation. As a matter of fact, there is tremendous progress and momentum happening in DC with the federal sales tax bills that would make the affiliate nexus tax laws moot.

    Last month the National Governors’ Association came out in support of the Marketplace Fairness bills (House and Senate), with 13 Republican governors and 8 Democrat governors signing on. That created a big shift in DC, resulting in a lot of attention and outspoken support from both parties. As a matter of fact, Senate Majority Leader Reid (D-NV) said he thinks this bill is the one and only tax bill with broad bipartisan support, and he’s hoping for a vote in September.

    But this is a presidential election year, and we’re coming off a long period of partisan stalemate, where nothing is getting passed through Congress. So even if our Marketplace bills are held up as ‘poster children’ of bipartisanship, it will be tough to get both houses and the president (whoever he may be) to give this attention until 2013, and it will be in amongst a huge backlog of other bills.

    California and Pennsylvania are moving ahead mostly due to local political pressures. They passed these laws and despite the extensions, face political pressures too great for them to repeal them at this point. Additionally, both Governors support federal legislation and feel that keeping these laws on the books will continue to pressure Congress to act.

    In California there will be a work-around process where advertisers can still have publishers (and not be obligated to collect sales tax) if publishers agree to avoid certain practices that looks like solicitation. We’ll be publishing more information soon.

    Rebecca Madigan