CALIFORNIA SALES TAX: OUT OF STATE SELLERS SALES TAX LIABILITY

OUT-OF-STATE SELLERS:
DO YOU NEED TO REGISTER WITH CALIFORNIA STATE BOARD OF EQUALIZATION FOR SALES AND USE TAX?

State of California taxes are governed by the following entities:
California BOE Sales Tax
California Income Tax Franchise Tax Board FTB
California EDD Payroll or Employment Tax

Many companies who are not physically present in California are often bewildered when they receive sales tax notice or sales tax audit letter from California California BOE Sales Tax . These companies often ask: Do I need to collect California sales and use tax when my business is located outside the state?

That depends. Retailers based outside California are required to pay California sales or use tax on sales of merchandise to California customers if they are “engaged in business” in the state and must register to pay sales and/or use tax.

Am I engaged in business in California?

You are engaged in business in California if situation 1, 2, or 3 applies to your operations.

1. Business location in CaliforniaYou have a permanent or temporary office, distribution center, sales or sample room, warehouse, or other physical place of business in California.

2. Representative in CaliforniaYour business does not have a physical location in California, but you have a representative in the state who makes sales, takes orders, installs merchandise, trains customers, or makes deliveries.

3. Leases of property in CaliforniaYou receive rental payments from the lease of tangible personal property that is located in California.

If situation 4 or 5 applies to your operations, you generally are not required to register to pay California sales or use tax.

4. Trade showsYou are physically present in California only

•To engage in convention and trade show activities for not more than 15 days during any 12 month period,

AND

• During the prior calendar year, you did not earn more than $100,000 of net income from those activities in this state.

However, if you sell any merchandise at a trade show, or take orders for merchandise delivered later to California customers, you must collect and remit use tax on those sales even though you’re not required to hold an ongoing permit.

5. Shipping by Common Carrier
Your only connection with California is to ship products to customers by U.S. Mail or other common carrier.

Please note that the descriptions herein are general in nature and should not be considered a complete guide to your sales tax analysis. Los Angeles Tax Attorney: Victor J. Yoo