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California Sets New Tax Rules For Out-Of-State Online Retailers

  • Written by  Glenn Taylor
California Sets New Tax Rules For Out-Of-State Online Retailers

The South Dakota v. Wayfair Supreme Court decision required online-only retailers to collect sales taxes, even in states where they don’t have a physical presence. One state already is following suit: Beginning April 1, 2019, out-of-state retailers selling above certain thresholds will have to start collecting California use taxes on their sales into the state.

California will require out-of-state retailers to collect taxes if, during the previous or current calendar year:

  • Their sales for delivery into California exceed $100,000; or
  • The retailer made sales for delivery into California in 200 or more separate transactions.

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California is one of the first large states to announce such a policy; other states including Texas, New York and Florida have yet to weigh in. But given California’s population and the size of its economy, the state is often a trendsetter. (If California were a country, it would have the world’s fifth-largest economy.) Retailers across the nation should pay close attention to how other states might adapt their own tax policies.

"Today's announcement does not increase or create any tax," said Nick Maduros, Director of The California Department of Tax and Fee Administration (CDTFA) in a statement. "Rather, 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."

Retailers are required to report and pay any district tax to the CDTFA on their sales and use tax return.As many as 27,000 companies might be required to register with the state and begin collecting tax.

Previously, government agencies could collect tax from online retailers only if the businesses had a physical presence in their states. California has used that authority to collect tax from online retailers with warehouses or other offices in the state since 2012.

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