Effective from April 1, 2019, California has introduced new Sales Tax registration and collection requirements from out of state retailers post Wayfair case decision of the Supreme Court
Sales made to California customers:
As of April 1, 2019, certain out-of-state retailers are required to register with the California Department of Tax and Fee Administration (CDTFA), collect California sales tax and remit taxes to the CDTFA regardless of having a physical presence in the state.
Out of states businesses with more than $100,000 in annual sales from California, or businesses with more than 200 transactions in the state within the preceding or current calendar year would fall within the ambit on new requirements.
The new California law follows the June 2018 decision of the Supreme Court in South Dakota v. Wayfair, Inc wherein the Supreme Court overruled the 1992 Quill case judgement which required physical presence of the out of state business to satisfy the nexus requirement so as not to violate the Commerce clause and Due process clause of the Constitution. In this landmark decision the Supreme Court ruled that the ‘physical presence rule’ is not a necessary interpretation of the requirement that a state tax must be “applied to an activity with a substantial nexus with the taxing State” thereby affording greater latitude to the States to enforce their reach on certain out of state retainers selling to instate buyers.
In light of the freedom afforded by this judgment CDTFA Director Nick Maduros stated that “California will now require more out-of-state retailers to collect and remit taxes just as brick-and-mortar retailers have done for decades. With the Supreme Court ‘s decision in Wayfair, California is able to help level the playing field for California businesses.”
Change for in state businesses as well (Sales within a single District):
Beginning April 1, 2019, any retailer whose sales into a single district exceed $100,000 or who makes sales into a district in 200 or more transactions in the preceding or current calendar year will also considered to be engaged in business in that district and will be required to collect that district ‘s use tax on sales made for delivery in that district. This requirement will apply to both in-state and out-of-state retailers. Retailers will be required to report and pay any district tax to the CDTFA on their sales and use tax return.
Sales made in other states:
California retailers doing sales to customers in other states also need to be aware that about 30 other states have passed laws post Wayfair decision imposing similar obligations on Out of State businesses to register, collect and deposit Sales tax for sales made to buyers in their states. Many other states are still studying the implications of the Wayfair decision and may pass similar laws soon.
Majority of the states have adopted the South Dakota threshold of $100,000 in sales or over 200 transactions annually, but some states have different requirements