California Enforces Economic Nexus Requirements Beginning April 1
On April 1, California will begin enforcing economic nexus requirements. Out-of-state sellers with customers in California must start to collect and remit sales tax to the state if specific economic nexus thresholds are met. Due to the population and economic activity in California, many multi-state sellers will be impacted by these new sales tax obligations.
Economic Nexus Requirements
Any out-of-state seller who reaches the following thresholds in the current or preceding calendar year must register with the California Department of Tax and Fee Administration and begin remitting sales tax for all transactions made with California residents:
- More than $100,000 in taxable sales; or,
- A minimum of 200 transactions delivered into California
Qualifying sellers will be responsible for tax collection on sales completed on or after April 1, 2019.
Out-of-state sellers need to review their sales into California beginning in 2018 to determine if thresholds are met. As soon as these thresholds are reached, now or in the future, economic nexus is established and these sellers must begin collecting and remitting sales tax the day thresholds are exceeded. This new collection responsibility will not be enforced retroactively.
Additionally, each district has similar economic thresholds that apply to a local district tax collection responsibilities. This tax applies not only to eCommerce sellers, but any person or business that sells taxable goods to customers in California.
How to Tackle the Tax
April 1 promises to be a milestone day, as a new group of out-of-state companies with no physical presence in California will face economic nexus requirements. You may be asking yourself, “How do I register with the state? Am I prepared to collect and remit sales tax? How will I manage sales tax return compliance?” A strategic plan should be followed to streamline compliance and minimize sales tax exposure.
Where to Start
First, identify if you meet the thresholds. Then, determine the resources and manpower needed to comply with these new sales tax obligations. Consider consulting with a sales tax expert to review your options. Be sure to review the economic nexus requirements in other states. Be proactive. Do not wait for California, or any other state, to contact you for non-compliance.
For more information about California’s economic nexus requirements, visit the California Department of Tax and Fee Administration website. If you have questions or are interested in consulting with a Cherry Bekaert sales tax expert, tell us how we can reach you.