New economic nexus requirements for retailers in California
Beginning April 1, 2019, out-of-state retailers selling above certain thresholds will be required to collect California use taxes on their sales into California. The recent U.S. Supreme Court decision in South Dakota v. Wayfair, Inc. expands the tax collection obligations of certain retailers under California law. In Wayfair, the U.S. Supreme Court held that physical presence is no longer required to establish sales and use tax nexus.
Requirements for Certain Out-of-State Retailers
For out-of-state retailers, the new collection requirement applies if, during the preceding or current calendar year:
- the retailer’s sales for delivery into California exceed $100,000; or
- the retailer makes sales for delivery into California in 200 or more separate transactions.
This new use tax collection requirement is not retroactive and applies only to sales made on and after April 1, 2019.
Retailers who are already required to be registered to collect California use tax prior to April 1, 2019, will see no change in their registration obligations. Retailers with a physical presence in California are still generally required to be registered with the California Department of Tax and Fee Administration (CDTFA). Retailers may choose to register and collect the tax prior to April 1, 2019. Retailers can register on the CDTFA website at www.cdtfa.ca.gov.
Impact on District Tax Collection Requirements for Out-of-State and In-State Retailers
Certain retailers selling above these thresholds in a single local jurisdiction (district) will also be responsible forcollecting that district ‘s use tax. Beginning April 1, 2019, this responsibility will apply if, during the preceding or current calendar year:
- the retailer’s sales into the district exceed $100,000; or
- the retailer made sales into the district in 200 or more separate transactions.
This requirement is not retroactive and applies equally to in-state and out-of-state retailers beginning April 1, 2019.
News Release 18-59, California Department of Tax and Fee Administration, December 11, 2018; Special Notice L-591, California Department of Tax and Fee Administration, December 2018; Special Notice L-565, California Department of Tax and Fee Administration, December 2018