"What Does Online Sales Tax Battle Mean for APIs"

Amazon sent me an email about the recent signing of the online sales tax law by California Governor Brown, which would force online retailers who have no physical presence in California, to collect the same levies as bricks-and-mortar stores.

As a result of this, contracts with all California residents participating in the Amazon Associates Program are terminated effective, June 29, 2011.

As I was writing up the story of this on kinlane.com, ad it got me thinking about the impact of this on API affiliate programs. I'm tracking on various monetization strategies for APIs, and affiliate sales is one of them.

California has broadened their definition regarding who has to pay sales tax, to include theaffiliatesof online retailers. But from what I can read it all still goes back to the sale of "tangible personal property". The tax code defines what type of merchandise is subject to use tax as:

Generally, the same types of items that are subject to sales tax are subject to use tax. Sales and use tax applies to the sale or use of tangible personal property in California. Section 6016 of the Revenue and Taxation Code defines tangible personal property as "personal property which may be seen, weighed, measured, felt, or touched, or which is in any other manner perceptible to the senses."
I'm no lawyer, but my interpretation of the assembly bill 28, is that if your API is not faciliting the sale of tangible goods, you are safe. If your selling access to bits and bytes, and you want to share revenue with developers and / or affiliates who drive traffic and sales to your API, you are not subject to any online sales tax for California.

I haven't read New York, Illinois or other states bills. I will some night when I need help going to sleep, and update in the future.

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