eBay warned its affiliates that the state of California is considering legislation similar to the "Amazon Tax" bill that passed in New York last year. California Assembly Bill 178 would require retailers to collect California sales tax if they compensate affiliates and publishers located in the state.

eBay said the bill was being watched closely by other states, "who are looking at ways to drive more tax revenue so it could have a cascading effect on the affiliate industry if it were passed." The eBay Partner Network blog recommended that affiliates who live in California consider writing to their representatives to oppose this legislation.

New York passed Tax Law § 1101(b)(8)(vi), last April, requiring online sites such as Amazon.com and Overstock.com to collect New York sales tax because their affiliates residing in New York count as a physical presence. Amazon had sued New York, arguing that that the Commerce Clause of the US Constitution prevented the state from imposing tax-collection obligations on out-of-state entities absent a "substantial nexus" with the state.

Melanie Seery, an affiliate from New York, wrote on her blog that she believed California AB 178 would be "even more devastating than the NY bill."

California is holding a hearing on the bill this month. Gazette.net wrote that a similar bill in Maryland was gaining support as well.