Ok, I read a little more about the law. The law says affiliates are a “physical presence” in the state which require collecting sales tax. So now I see why Amazon and a whole bunch of other big retailers dropped their California affiliates.
This is lame. Affiliates are like directories. If a physical store pays Yellow Pages to put an ad in the directory, I don’t think that is considered a physical presence.
Also if a customer clicks on a CA affiliate link and sees sales tax added to the order, he will just go find a non-CA link with no sales tax! Duh, CA government! So CA not only wouldn’t get sales tax anyway but now also loses income tax and jobs for its residents.