In the past, an online seller who sold to customers located in a particular state had to have some physical presence in that state before the state could require the seller to collect and pay state sales tax. However, the requirement for physical presence was overturned in the Supreme Court's decision in South Dakota v. Wayfair Inc. in 2018. Like many other states, California has updated its laws for Internet sellers in the wake of Wayfair. California calls sales taxes collected by out-of-state sellers "use taxes," but they are the same as sales taxes.
Effective April 1, 2019, retailers located outside of California (remote sellers) are required to register with the California Department of Tax and Fee Administration (CDTFA) and collect California sales tax if they sell more than $500,000 in tangible personal property for delivery in California. The registration requirement applies if you sold more than $500,000 in property during the prior calendar year. It also comes into effect any time you sell more than $500,000 during the current year. For example, if you had more than $500,000 in California sales during 2018, you must register and collect sales taxes. If you didn't have more $500,000 in California sales in 2018, you must register and collect sales tax the moment you meet that threshold during 2019. You should keep records of your sales into California.
These rules apply to all remote sellers located outside of California that sell tangible goods for delivery into California through the Internet, mail-order catalogs, telephone, or by any other means. The $500,000 sales threshold includes sales made by the retailer itself and people related to the retailer. This includes family members and any person or entity that owns 50% or more of the retailer's business.
These new rules supersede all of California's prior tax collection requirements for all retailers. If you registered with the CDTFA under the prior rules, you don't need to re-register. If you registered under the prior rules, but do not meet the $500,000 sales threshold, you may either close your account with the CDTFA or continue to collect the sales tax as a courtesy to your California customers. To close your account, contact the CDTFA Customer Service Center at 1-800-400-7115.
If you make your California sales though an online marketplace such as Amazon, you must still register with the CDTFA. However, the online marketplace may collect and pay the sales taxes on your behalf. Check with your marketplace for more information. If you make sales directly from your own website, you must collect and pay these taxes yourself.
Even if you don't meet the $500,000 sales threshold, you'll still need to register with the CDTFA if your business has a physical presence in California. Examples of a physical presence in the state include, but are not limited to:
You may register with the CDTFA online at the Taxpayer Online Services Portal. Scroll down to Registration, select Register a New Business Activity or Location, and follow the prompts. You'll be issued a seller's permit. For more information, see the online guide Use Tax Collection Requirements Based on Sales into California Due to the Wayfair Decision at the CDTFA website.