Sales Tax Fundamentals
Get up to speed on the basics of sales tax
Economic Nexus Laws by State: California
byDecember 12, 2018
Looking for more information on how to navigate sales tax in California?
State laws on economic nexus vary and it’s hard to keep up if you’re doing business in multiple states. We’ve done the research for you and here’s all the information you need to know about economic nexus in California.
What is economic nexus in California?
With the recent South Dakota v. Wayfair Supreme Court ruling in favor of South Dakota, states are now free to pursue sales tax from eCommerce businesses who have a “significant presence” in their state.
Significant presence or “nexus” was previously defined as having a physical presence (ex: brick and mortar store, employee, or inventory in a fulfillment center like FBA). But with this recent ruling, now this definition has been expanded to include economic activity in a state as well. This concept of triggering sales tax responsibility because of your economic activity in a state is now referred to as economic nexus.
Most important, this now means that if you pass a state’s economic threshold for total revenue in that state and/or number of transactions in that state, you’re now legally required to register, collect and remit sales tax for that state.
What’s the threshold for economic nexus law in California?
- State: California
- Threshold: Sales of $500,000 in California in the state in the current or last calendar year.
- Summary: According to state law, remote sellers in California who exceed the $500K gross sales are required to register with the CDTFA, collect sales tax on sales that ship to California, and remit the sales tax to the state.
- Full text: You can read guidance on the text of California economic nexus law here.
When did this California law go into effect or is it planned?
April 1, 2019, was when California’s original economic nexus laws took effect, but they evolved as of April 26, 2019, from $100,000 in sales and 200 transactions annually, to $500,000 in sales and no transaction threshold.
I’m close to meeting this threshold for California. Will TaxJar notify me when I reach it?
With TaxJar’s Economic Nexus Insights Dashboard, you can see where you currently have nexus, where you’re approaching nexus, and recommended next steps on how to begin complying with sales tax in all states.
Proactive notifications let you know when you’re approaching or have reached thresholds, so you can stay in front of any changes to your nexus requirements. To be automatically notified when your business reaches economic nexus in a state, get started at TaxJar.com/how-it-works.
I meet the economic threshold requirement in California. Now what?
Here’s a quick checklist of what to do next:
- Register for a sales tax permit in California (info below)
- Choose a technology like TaxJar to help you manage multi-state compliance. Sign up for a free 30-day trial to see how we can help you save time!
- Connect TaxJar once to all of the places you sell
- Ensure all your eCommerce channels are setup correctly to collect sales tax
- Enroll in AutoFile and tell us how often you need to file
- Relax, you now handled your sales tax exposure. We’ll handle the rest for you.
Can you help me register for a sales tax permit?
Certainly! TaxJar offers these two options:
- Read our do it yourself instructions for every state
- Visit TaxJar.com/register to have one of our expert partners do it for you (~$100 each state not including state’s fees)
Who can handle my California sales tax filings for me?
At TaxJar, we help more than 15,000 sellers manage their sales tax needs every month. We help your business save on submitting your returns with our automated filing service called AutoFile. Read more about how AutoFile can handle all of your returns in as many states as you’d like.
I’ve met this threshold in California, now where can I ask questions?
We recommend speaking with a vetted sales tax expert to answer specific questions for your business.
Ready to automate sales tax? To learn more about TaxJar and get started, visit TaxJar.com/how-it-works.