Legal Question in Business Law in California

A bill called the affiliate Nexus tax bill has recently been passed in California causing companies like Amazon and Overstock to terminate their affiliates due to the law saying that these companies have to now charge sales tax to customers because they have physical presence in the state through their affiliates.

Is it legal to form an LLC in another state such as Nevada to act as a registered agent in order to get around this so that I can continue being affiliated with these companies? Any tax issues, extra fees, or difficulties I should be aware of?


Asked on 7/07/11, 4:39 pm

4 Answers from Attorneys
Bryan Whipple Bryan R. R. Whipple, Attorney at Law

First, the location of your registered agent has nothing to do with where your company is doing business. The registered agent is just someone you appoint to receive services of process in the state of your formation.

It is of course "legal" to form an LLC wherever you wish. It is not legal to tell the California Board of Equalization that you are doing business in Nevada when all you have in Nevada is your formation documents and your registered agent. If you are doing business in California, you need to tell the BOE that you are doing business in California, or God help you when they find out!

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Answered on 7/07/11, 7:21 pm
Kevin B. Murphy Franchise Foundations, APC

As a Franchise Attorney I agree with the other attorney answer. Forming an LLC in Nevada doesn't change anything if you're doing business in California - at least from California's perspective. If you want to "get around" California's affiliate Nexus tax bill, try moving to a different state and operating out of that state. Consult with a good business or franchise attorney in your area for specific advice.

Mr. Franchise - Kevin B. Murphy, B.S., M.B.A., J.D.

Franchise Foundations, a Professional Corporation

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Answered on 7/08/11, 7:06 am
Shawn Jackson The Jackson Law Firm, P.C.

Remember that the basis of the tax issue is your "presence" within the State of California. The rationale is that if you are going to use the State's infrastructure and services, you should pay your part.

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Shawn Jackson ESQ. (707) 584-4529

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Answered on 7/08/11, 7:47 am

All the information provided earlier is correct, but "legalese." In layman's terms, what they are saying is that where your business physically operates is what is relevant, not where you are registered, incorporated or have an LLC. So the only way to avoid the new law and get Amazon to affiliate with you again is to move your actual physical operations out of California.

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Answered on 7/08/11, 12:39 pm


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