Quick Answer: You need to get a sales tax permit in California if you have a physical presence, meet economic nexus requirements, have an affiliate in California, or attend trade shows in California that generate $100,000 in net income or last for 15 or more days. More detailed information on permit requirements in California is included below.
Your business owes sales tax in any states where it has “sales tax nexus”. In short, if you have sales tax nexus you need to collect and remit sales tax. If you don’t have sales tax nexus, you generally don’t need to get a permit.
Sales tax nexus is a legal term that means you have crossed a threshold and now have a sales tax collection responsibility in the state. Nexus can be created by having a physical presence, an economic presence, or by other factors. Nexus rules vary by state and retailers have specific nexus rules based on where they have people, property or inventory.
For a comprehensive overview of California sales tax, including the latest rules and regulations, visit our California Sales Tax Guide. This resource provides all the information you need to ensure compliance and understand your tax obligations in the state.
Once you determine that you have sales tax nexus in California, your next step is to register for a sales tax permit in the state. Check out our blog post on getting a sales tax permit in California for more information about that process. If you are not interested in doing the work of getting the permit yourself, TaxValet can handle the permit registration for you with our Sales Tax Permit Registration Service.
1. Economic nexus in California
If you made $500,000 of sales in California, then you are required to register for, collect, and pay sales tax to the state. If you meet this threshold, it does not matter if you have a physical presence in California. Nexus has been created based on your volume of sales. For more information, please see the California Department of Tax and Fee Administration.
If you need help determining which states you have crossed economic nexus thresholds, check out our Sales Tax Starter Kit service.
2. Physical presence in California
The following creates physical presence nexus in California. If you have any of the following in California, you will need to get a sales tax permit:
If you need help determining which states you have a physical presence in, check out our Sales Tax Starter Kit service.
If you are an online retailer who ONLY sells on approved marketplaces (such as Amazon, eBay, etc), California sales tax will be remitted by the marketplace and you do not need to get a sales tax permit.
For more information, see the Tax Guide for Marketplace Facilitator Act which states, in part, “beginning October 1, 2019, you as a marketplace seller are not required to be registered with the CDTFA for a seller’s permit or a Certificate of Registration if all of your retail sales of merchandise will be facilitated by a marketplace facilitator that is registered as a retailer with the CDTFA.”
If you are an e-commerce seller who is unsure of where you need to get a sales tax permit, check out our Sales Tax Starter Kit service. In fact, if at any point you are stuck and want a team of experts to handle all of this for you, don’t hesitate to contact us.
1. Affiliate Nexus in California
What exactly is affiliate nexus? Affiliate nexus can exist when a business has sufficient contact with a state through a separate business. If your out-of-state business has a relationship with an in-state business, then you may have affiliate nexus.
Please keep in mind that an “affiliated business” does not necessarily mean that it is a marketing “affiliate” in the typical sense of the word. Instead, “affiliate nexus” refers to the relationship between two businesses.
In California, out-of-state-retailers must collect sales tax if “a person or persons in this state, for a commission or other consideration, directly or indirectly refer potential purchasers of tangible personal property to the retailer, whether by an Internet-based link or an Internet Web site, or otherwise.” Nexus occurs when sales from affiliates exceed $10,000 in the preceding 12 months AND total in-state sales exceed $1 million in the preceding 12 months value of both entities’ outstanding stock.
For more information about affiliate nexus, see California Sales and Use Tax Law Chapter 3, Section 6203.
2. Presence at a Trade Show in California
Making sales at a trade show in California may create nexus in the state if:
For more information about nexus created by trade shows, see Regulation 1684.