California Quickly Changes Position on Sales Tax Nexus
Less than a month after California’s economic nexus laws became effective, the largest state has changed their legislation to the benefit of many small sellers across the nation. On April 25, 2019, Governor Gavin Newsom signed the bill (AB-147) that raised the economic nexus threshold. Under the new law, if remote sellers have $500,000+ in sales on an annual basis to California customers, they are responsible for collecting and remitting sales tax. Previously, the thresholds were $100,000 in total gross sales into the state or 200 transactions.
The new law also requires marketplace facilitators such as Amazon and eBay to begin collecting and remitting sales tax to the state of California on behalf of their third-party sellers who meet these new economic thresholds, beginning October 1, 2019. California is one of several states that has eliminated the transaction count from economic nexus thresholds. For most small sellers, their transaction count causes the sales tax obligations. Will other states start to follow California’s lead, positively impacting small sellers? Only time will tell, but this has been the trend in recent months. For more information, review this list of states with economic nexus laws and marketplace facilitator requirements.
Please be aware, if a company has physical presence in the state, these new laws do not have an impact, as the responsibility to collect tax already exists due to the existing physical connection with the state. Physical presence can stem from many activities: offices, employees, independent sales agents, inventory in the state – including at Amazon warehouses.
Sales tax obligations are rapidly changing as a result of the Wayfair Supreme Court decision last year. If you need help figuring out how your company is impacted by the decision, as well as assistance with compliance, contact our Cherry Bekaert Sales Tax team.