Who Must Pay
California has an exemption for “Small Sellers” like most other states that have adopted economic nexus. The new collection requirement apply to out-of-state retailers that, in the current or preceding calendar year, have:
More Than $100,000 In Taxable Sales (in California), or
- 200 or more Separate Transactions for delivery into California.
What Sales Are Subject To California Sales Tax
Sellers who meet one or both of the above criteria must register with California Department of Tax and Fee Administration (CDTFA), collect taxes and make tax payments on their sales starting April 1, 2019.
- California sales tax generally does not apply to the sale of Services unless the service is part of a sale of tangible personal property.
- The sale of digital goods and services (e.g., ebooks, computer files and programs, and streamed music and movies) are not subject to California sales tax unless the purchaser also obtains tangible personal property. This means that a sale of a digital product that also includes a T’shirt, physical book, storage media or anything that is physically shipped/delivered as part of the transaction is a taxable sale.
Do Out-Of-State Sellers Owe Tax On Sales Made Through An Online Marketplace?
If your sales into the state (including sales made through one or more marketplaces) surpass either economic nexus threshold, you’re responsible for collecting and remitting California sales tax.
Some marketplaces collect and remit on behalf of their sellers. Businesses are responsible for contacting all marketplaces they sell through to determine which, if any, collect and remit taxes on their behalf.
If you sell online and have customers in California, you must determine if your sales into the state exceed the sales or transaction threshold. Check out Avalara’s state-by-state guide to sales tax nexus rules. You can also speak with a trusted tax advisor or contact the CDTFA to determine your next steps.
Some states, including Georgia for example, require that the the seller’s invoice, purchase contract, or other documentation must indicate the method of delivery. If the method of delivery is not indicated, delivery will be presumed to have been made through a tangible medium, and the burden will be upon the seller to establish to the satisfaction of the Department that the sale(s) was in fact electronic.