CA California State sales tax rates
STATEWIDE SALES TAX RATE
ECONOMIC SALES THRESHOLD
Do you need to collect sales tax in California?
You’ll need to collect sales tax in California if you have nexus there. There are two ways that sellers can be tied to a state when it comes to nexus: physical or economic. Physical nexus means having enough tangible presence or activity in a state to merit paying sales tax in that state. Economic nexus means passing a states’ economic threshold for total revenue or the number of transactions in that state.
Do you have physical nexus in California?
In California, every retailer engaged in business has physical nexus which includes but is not limited to having:
- A physical location – This includes an office, place of distribution, sale or sample room or place, warehouse or storage place, or other place of business.
- A person working for you – This includes a representative, agent, salesperson, canvasser, independent contractor, or solicitor operating in this state under the authority of the retailer or its subsidiary for the purpose of selling, delivering, installing, assembling, or the taking of orders for any tangible personal property.
- An affiliate – Also called “click through” nexus, this includes “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.
- Presence at a tradeshow – Making sales at a tradeshow may constitution nexus, but if the retailer had a physical presence at a convention or trade show for 15 or fewer days in any 12-month period and did not derive more than $100,000 of net income from these activities in the prior calendar year, nexus would not have been established. However, and it’s a big however, sellers are still required to collect use tax from buyers at trade shows.
Do you have economic nexus in California?
Effective April 26, 2019, California considers retailers who exceed $500,000 in taxable annual sales to have economic nexus. This means the state considers these sellers now obligated to collect sales tax from buyers in that state.
Is what you’re selling taxable?
If you’ve discovered you have sales tax nexus in California, your next step is to determine if what you’re selling is taxable.
Services in California are generally not taxable. However, if the service you provide includes creating or manufacturing a physical item, you may have to deal with the sales tax on products.
Is SaaS taxable in California?
SaaS is non-taxable in California since there is no transfer of tangible personal property.
What is use tax?
A business owes use tax on any purchase made to a retailer outside the state where the seller did not collect California sales or use tax (the use tax rate is currently 7.5%) and the item was used, given away, stored or consumed in California.
When are Returns Due?
When you file and pay California sales tax depends on two things: your assigned filing frequency and your state’s due dates.
How often will you file sales tax returns in California?
States assign you a filing frequency when you register for your sales tax permit. In California, you will be required to file and remit sales tax either monthly (in special cases), quarterly, semiannually or annually (calendar annual or fiscal annual).
California sales tax returns are always due the last day of the month following the reporting period. If the filing due date falls on a weekend or holiday, sales tax is generally due the next business day.
Important to Note: California requires some high-volume sellers to file on a quarterly basis but make monthly sales tax prepayments. If this applies to you, you will have monthly prepayments due to California by the 24th of the month following every month in which you do not have a sales tax filing and payment due.