California implements Wayfair sales tax threshold

Your Guide to State, Local, Federal, Estate + International Taxation

Wayfair, sales taxRecently the U.S. Supreme Court issued a landmark ruling in South Dakota v. Wayfair. This ruling opens the door for states to impose sales tax on internet retailers who sell into a state even if they have no property or employees in that state. Not surprisingly, other states have taken notice and are starting to pass legislation within the confines approved by the U.S. Supreme Court in the Wayfair decision.

California, due to its size and market, is one of the most consequential states to impose new rules based on this decision. Effective April 1, 2019, it will begin to impose sales and use tax thresholds based on Wayfair. These new rules are as follows:

Don’t miss: The business impact of multistate and online sales tax

Retailers with no physical presence in the state or in a district during the current or preceding calendar year must collect and remit California state and district use taxes if their sales of tangible personal property comprised:

  • $100,000 of sales into the state/district; or
  • 200 separate transactions.

This means, effective April 1, 2019, if the $100,000 sales or 200 transactions threshold was met in 2018:

  • California retailers must begin collecting and remitting district use taxes for districts in which the threshold was met; and
  • Out-of-state businesses must register with the California Department of Tax and Fee Administration (CDTFA) and begin to collect and remit California state and district use taxes if the threshold was met in the state and the district.

The CDTFA’s Special Notices announcing these developments can be accessed here and here.

Have questions? Our tax professionals help clients in a variety of industries including construction, dealerships, restaurants, technology and more.

Ron Greenfield, CPA