The U.S. Supreme Court in 2018 issued a ruling (South Dakota v. Wayfair) which opened the door for states to impose sales tax on internet retailers who sell into a state. As a result of this ruling, many states have begun passing laws and issuing regulations based on the Supreme Court decision. California, due to its large size, is one of the most important states to enact new rules related to this. Originally, the California Department of Tax and Fee Administration imposed a $100,000 and 200 transaction threshold which took effect on April 1, 2019.
However, on April 25th, 2019, Governor Gavin Newsom signed legislation which increased the threshold to $500,000 of sales of tangible property in California with no transactional threshold. This supersedes the CDTFA limits that were previously being enforced.
This legislation is a positive development for businesses, especially small businesses, for several reasons, among them are:
- The higher $500,000 threshold means sellers can make an unlimited number of sales into a district without having to collect tax as long as total California sales stay below $500,001.
- Smaller businesses will be relieved from a lot of the requirements which will instead fall on larger corporations which facilitate the transaction such as Amazon.
This information is meant to be a general summary of the new California standards. These can change or be modified at any time so as always, consult your Henry+Horne tax professional.
Ron Greenfield, CPA