Do you need to collect and remit sales tax in California?
If you meet the economic or physical nexus threshold in California, you must register with the California Department of Tax and Fee Administration (CDTFA) and pay sales tax to the state. Certain circumstances may exempt you from needing to file, such as if you sell through a Marketplace Facilitator. Also, sales tax does not typically apply to services in California, unless the services are considered a part of the sale of tangible personal property. If you need more clarification on whether you need to charge sales tax, refer to this document.
Do you have sales tax nexus in California?
There are two types of nexuses: physical and economic. Physical applies to having a physical location from which you do business in California, such as a storefront. Economic presence means that you have exceeded the annual $500,000 sale threshold.
Physical sales tax nexus in California
Common indicators of having physical nexus in California include:
- Maintaining, occupying, or using an office, place of distribution, sales or sample room, warehouse or storage place, or other physical place of business in state.
- Having representatives, agents, or independent contractors operating in California under your or a subsidiary’s authority to make sales, take orders, make deliveries, etc….
- Receiving rental payments from tangible personal property located in the state.
Economic sales tax nexus in California
The only requirement for meeting economic nexus in California is in exceeding $500,000 of annual sales of tangible personal property to places or people in-state. In instances of non-taxable products or sales for resale, you must still file if you exceed the annual economic threshold.
Are marketplace facilitators required to collect and remit sales tax in California?
As of October 1st, 2019, California enacted the Marketplace Facilitator Act, which means that if you sell through a marketplace facilitator you are not responsible for collecting and remitting sales tax on goods sold through them. However, the marketplace facilitator must be registered with California and have a current seller’s permit or Certificate of Registration – Use Tax. It is important to verify with whatever marketplace you sell through that they are registered with California and have the correct documentation and permits.
What platforms are marketplace facilitators?
Some platforms that are considered marketplace facilitators are:
Not sure what a marketplace facilitator is? In short, marketplace facilitators are companies that provide a platform or service for third-party sellers to sell their products or services to customers. The facilitator collects payment from the customer, processes the transaction, and may also handle shipping and returns.
Filing California Sales Tax
After registering for a California sales tax permit, you can file you California sales tax returns one of three ways:
- Like most states, California recommends filing sales and use tax returns online for accurate and prompt filing. To file online, you will have to register for an Online Services Profile on CDTFA.
- Note: CDTFA used to offer Limited Access Codes to filers without an online services profile, but they are phasing out the use of these codes as of 2023.
- Once you have created your online services profile, you can file online before or by your return due date. If you need detailed instructions on how to file sales and use tax returns with California, click here.
File via Paper Return
- If you choose to, California still offers filers the option to fill out and mail paper returns using this form. The main differences between the paper and electronic returns are:
- When filing via paper return, you are limited to paying with either paper check or money order, while online you can pay your tax due with ACH Debit (i.e., bank account), credit card (a convenience fee may apply), or paper check.
- Unlike electronic filing, California paper returns do not offer the option to allocate taxable sales and tax due to cities and counties, which increases the risk of faulty reporting. In such a case where sales and tax are reported incorrectly, you may be at risk of needing to amend your return and pay additional fees.
Let us file for you!
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When are sales tax returns due in California?
When you register with California to file sales and use taxes, your filing frequency and due dates are assigned to you by the state depending upon your reported sales tax or predicted taxable sales at time of registration. There are five filing frequencies in California: monthly, quarterly prepay, quarterly, fiscal yearly, and yearly. Returns are due the last day of the month following your period end date except for quarterly prepays, which are due the 24th of the month before a quarter end. Additionally, if your due date falls on a weekend or state holiday, it will be extended to the next business day. A detailed look at the due dates for each frequency can be found here.