New California Sales & Use Tax Requirements
California requires retailers with a physical presence in the state to register for sales and use tax. Examples of physical presence include:
- Maintaining inventory or office locations in California;
- Having employees or representatives in California for purposes of taking orders, making sales or deliveries, or installing or assembling tangible personal property;
- Leasing equipment, including computer services in California.
In response to the recent South Dakota v. Wayfair, Inc. case decided by the U.S. Supreme Court, California is following suit and imposing new sales and use tax (district use tax) requirements on out-of-state retailers.
Effective April 1, 2019, the thresholds for having to register for sales and use tax for businesses that do not have a physical presence in the state of California (companies selling through the internet) are:
- California sales exceeding $100,000 per year; or
- 200 or more orders per year
Marketplace providers (ex. Amazon) may decide to collect and pay use tax on behalf of an online seller but are not required to do so.
Please note these requirements were announced through a notice and FAQ issued by the California Department of Tax and Fee Administration (CDTFA). We expect state legislation and additional guidance to be released prior to the effective date of April 1, 2019.
Peggy Tilles, JD, LLM is a Senior Tax Manager at Sax and is the firm’s in-house advisor on Sales and Use Taxes and state tax nexus. She has over 25 years of accounting, government and corporate experience. At Sax, she advises clients on multi-state tax matters including tax research and proactive tax planning and directs tax credit studies. She can be reached at [email protected].