The expanded definitions of affiliate nexus in 2024 significantly impact digital goods and service providers by broadening the criteria for establishing a sales tax obligation. Affiliates now include entities with substantial influence beyond direct control, such as performance-based marketing partners and affiliates with significant operational roles. This expansion means:

• Increased Nexus Obligations: Digital goods and service providers are more likely to establish nexus through diverse affiliate relationships.

• Sales Tax Collection: Providers must collect and remit sales tax on their sales within California if they meet nexus criteria.

• Compliance Responsibilities: Enhanced obligations require thorough tracking of affiliate relationships and sales activities.

• Broad Coverage: Extends tax obligations to a wider array of digital products and services, ensuring comprehensive tax compliance across various business models.

These changes ensure that digital goods and service providers contribute fairly to California’s tax revenues, aligning with the state’s efforts to close tax loopholes and ensure comprehensive compliance.