California requires some remote sellers to register with CDTFA and collect and remit sales tax. Moreover, the new use tax collection requirement for a remote seller will apply to taxable sales of tangible personal property to California consumers on and after April 1, 2019, and is not otherwise retroactive. Retailers that exceed the $500,000 sales threshold in the preceding or current calendar year are now required to register with the CDTFA to collect the California use tax even if they were not previously required to register. These retailers include retailers that sell tangible goods for delivery into California through the Internet, mail-order catalogs, telephone, or any other means.
This guide contains information about the Wayfair decision and AB 147 and describes their effect on the requirements to collect California state, local and district use tax, and on the collection of special taxes and fees.
On April 25, 2019, California passed Assembly Bill No. (AB) 147 (Stats. 2019, ch. 5). AB 147 amended Revenue and Taxation Code (RTC) section 6203 to require retailers located outside of California (remote sellers, including foreign sellers located outside of the United States) to register with the California Department of Tax and Fee Administration (CDTFA) and collect California use tax if, during the preceding or current calendar year, the total combined sales of tangible personal property for delivery in California by the retailer and all persons related to the retailer exceed $500,000. A person is related to a retailer if they have a relationship with the retailer described in section 267(b) of title 26 of the United States Code and the related regulations.
Do Remote Seller’s need to register and pay California Sales Tax?
California Sales Tax? In general, the requirements to register and collect California use tax prior to AB 147 remain in effect. That is, retailers with a physical presence in California are still generally required to be registered with the CDTFA. Examples of a physical presence in this state include, but are not limited to:
Maintaining inventory or office locations in California.
Having representatives in California for purposes of taking orders, making sales or deliveries, or installing or assembling tangible personal property.
Leasing equipment, including a computer server in California.
AB 147 also amended RTC section 7262 to require all retailers, whether located inside or outside of California, to collect district use tax on all sales made for delivery in any district that imposes a district tax if, during the preceding or current calendar year, the total combined sales of tangible personal property in California or for delivery in California by the retailer and all persons related to the retailer exceed $500,000. This new collection requirement is operative April 25, 2019 (see Special Notice L-684). Please see the General Info and Collection Requirement section for additional information about district tax and the new district use tax collection requirement.
If you are a remote seller, contact a tax lawyer to discuss whether you need to register and pay California sales tax. The CDTFA could initiate a sales tax audit to make assessments against your business if you fail to comply with CDTFA regulations. If your business has collected sales tax, but failed to remit to the CDTFA, the CDTFA could assess a dual determination against officers.