As an e-commerce seller, you will need to collect sales tax in California if you have:
(1) $500,000 in annual retail sales in (economic nexus), or
(2) Physical presence in California (physical nexus).
Below, we will highlight some of the basic provisions of California sales tax law.
What is the tax rate range for California?
State: California’s general sales tax rate is 7.25%.
Local: California localities impose their own sales tax at rates ranging from 0.10% to 1.0%. Some localities are state-administered, others are not.
California City & County Sales & Use Tax Rates.
Do you have physical or economic nexus in California?
Physical nexus. Certain business activities create physical nexus in California. If you have physical nexus, you are required to collect and remit sales tax on all taxable sales that are shipped to California. Examples of business activities that can create physical nexus in California include:
- Physical location (office, distribution center, sale room, warehouse, storage place or other place of business).
- An affiliate, meaning your business (even if out of state) has ties to business affiliates in the state that engage in specified operations.
- A person working for you or your business, including a salesperson, agent, representative, etc.
- You rent or lease tangible personal property to someone in California.
California Department of Tax and Fee Administration
Economic nexus. California recognizes economic nexus for any vendor that makes total sales of tangible personal property for delivery in the state of more than $500,000 during the current or prior year. Once you have economic nexus established, you will be obligated to collect sales tax from buyers in the state.
- Wholesale sales of tangible personal property must be included
- Your sales through a qualifying marketplace provider are not included
- Once you exceed the threshold, your registration and collection obligation begins immediately.
California Use Tax Collections Requirements
What are examples of sales of taxable items?
- Tangible personal property, unless specifically exempted
- Prepared food
What are examples of sales of nontaxable/exempt items?
- Certain groceries
- Some prescription medication
- Medical devices
- Software as a service (SaaS) is not taxable in California because there is no transfer of tangible personal property.
- Digital goods (same reasoning as SaaS)
Are there any sales tax holidays?
Currently, California does not recognize any sales tax holidays.
Is California a member of the SST (Streamlined Sales Tax)?
Currently, California is not a full or associate member of the Streamlined Sales Tax Governing Board (SSTGB).
How to get a sales tax permit / links to register in this state?
You can register online at: California Department of Tax and Fee Administration
For more information on California rates, see: California City & County Sales & Use Tax Rates