Summary: This blog post outlines California’s economic nexus requirements which went into effect on April 1st, 2019.
If you sell products across state lines, you may be required to collect and remit sales tax in California. This is because of the state’s economic nexus law, which require out-of-state businesses that meet certain sales thresholds to collect and remit sales tax. In this blog post, we’ll explain how this law works and what the nexus thresholds are in California. By understanding these laws, you can ensure that your business is compliant with the state’s sales tax requirements. And if you have any questions, our team of experts is always here to help!
What is California’s Economic Nexus Threshold?
California’s economic nexus law states that out-of-state businesses must collect and remit sales tax if they have more than $500,000 in sales of tangible personal property in the current or prior calendar year. Businesses that cross California’s economic nexus threshold must register for a sales tax permit on the date that the threshold was crossed.
This means that businesses based in other states selling to customers in California must be aware of if their business has crossed the state’s threshold. Failure to do so could result in back taxes, fines, or other penalties for non-compliance. It is important for companies to consult sales tax professionals, like those at TaxValet, when considering California’s economic nexus requirements.
When Did California’s Economic Nexus Law Go Into Effect?
California’s Economic Nexus Law went into effect for out-of-state businesses on April 1st, 2019. This means that if your business crossed California’s economic nexus threshold after April 1st, 2019 then your business needs to get a sales tax permit.
If you crossed California’s economic nexus threshold before this date, then you would only need to register for a sales tax license in California starting when the law went into effect (April 1st, 2019). Please note that there are other considerations, such as physical presence, which need to be taken into account when deciding what your sales tax permit start date should be in California.
Since there are so many simple mistakes you can make that can cost you a small fortune, you should consider having our team of sales tax experts at TaxValet help you. The best way to get started would be to schedule a free initial consultation with us on this page.
What Are Businesses Supposed to Do if They Meet California’s Economic Nexus Threshold?
Businesses that meet California’s economic nexus threshold are required to register for a sales tax permit and begin collecting and remitting sales tax. This means the business must register with the state of California and keep records of taxable sales in the state. They must also set up their transaction platforms to accurately calculate sales tax based on the products that are being sold. After registration, it is important for businesses to stay up-to-date with any changes regarding filing guidelines that may arise in the future. Taxvalet’s sales tax experts can handle all of this for you as part of our Done-for-You service.
What Could Happen if I Cross California’s Economic Nexus Threshold and Don’t Get a Sales Tax Permit?
If you’re an out-of-state business that crosses California’s economic nexus threshold that doesn’t get a sales tax permit, you could be subject to audits, penalties, and interest. The audits would review the prior period of time to see if taxes are due, with penalties applied based on the amount not paid. Interest will also accrue at the rate determined by the State Board of Equalization for any unpaid taxes or late filing. Although audits from the California Department of Tax and Fee Administration may seem intimidating, working with a team of sales tax experts, like TaxValet, can help minimize your chances of a costly audit. TaxValet’s done-for-you service includes sales tax audit management as part of our monthly service.
Getting Help with California’s Economic Nexus Requirements
If your business crosses California’s economic nexus thresholds, you are required to get a sales tax permit and collect and remit sales taxes on all taxable sales delivered into the state. TaxValet can help you determine if your business meets California’s economic nexus thresholds and, if so, obtain a sales tax permit for your business. We offer a free initial consultation to help businesses understand their sales tax obligations in California. Click here to learn more and schedule your free consultation.