California sales tax does apply to all purchases of goods by California residents. If you live in CA and purchase something which sales tax apply to, you need

California sales tax does apply to all purchases of goods by California residents. If you live in CA and purchase something which sales tax apply to, you need to pay those taxes. Since remembering to pay sales tax to the state is a pain in the ass (not to mention an easy way to cheat on your taxes), CA law requires that merchants collect the sales tax on your purchases and send it to the state. Even pre-Internet, there was a problem with this: California law can't force businesses outside of CA to collect sales tax for CA residents. So if you bought something in another state, or from a catalog, you were suppose to report that on your income taxes and pay the appropriate CA sales tax. Of course, no one did, but it wasn't a big deal because there wasn't a lot of money in these sorts of sales. With the Internet, more and more purchases are going to businesses that are out of state (e.g. Amazon). Since most people are habituated to having the sales tax included in purchases, they probably don't even realize they owe sales tax at all. Or if they do, they probably don't report it since no one likes to pay more taxes. So now we come to this "nexus" problem. Currently neither Amazon nor its subsidiaries are in California, so CA laws don't apply to them and they don't have to collect sales tax for CA residents. This represents lost revenue for the state, but by changing the nexus rule to include affiliates, the state can get its sales tax laws to apply to Amazon and thus get more revenue. Amazon is resisting this because it will effectively raise their prices to CA residents (of course, CA residents were suppose to be paying that anyways). What actually happens if the law is passed should be interesting. Amazon has said they will drop all of the CA affiliates if the law passes, just as they did in Illinois. However, New York passed a similar law and Amazon started collecting NY sales tax instead of cutting off its affiliates, presumably because the hit from having to collect sales tax was less than the money that would be lost from not having it's NY affiliates.