Posted On: October 10, 2011 by Victor J. Yoo, Attorney at Law

California Sales Tax Audit: Who Needs to Pay California Sales Tax or Use Tax?

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


As a follow up to previous article on "OUT-OF-STATE SELLERS:
DO YOU NEED TO REGISTER WITH CALIFORNIA STATE BOARD OF EQUALIZATION FOR SALES AND USE TAX?", the following are some examples of situations that REQUIRE CALIFORNIA SALES OR USE TAX REGISTRATION.


Stocks of merchandise:
If you make sales both in and outside of California, at least one permit must be held when you maintain stocks of merchandise in this state. You are also required to hold permits for warehouses or other places in California where merchandise is stored or delivered from, or from which sales are fulfilled in this state. This is true even if the merchandise is used to fulfill your sales made outside California.

Sales representatives
You have a representative who operates under your authority to sell or take orders in California for any goods or merchandise.
Example: Your company does not have inventory in California or employees who sell in this state. Instead, you use an independent representative who sells your product along with many others. The representative works on a commission-only basis.

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Installations
You provide installation in California using your own employees or contractors. Revenue and Taxation Code section 6203(c)(2).
Example: You maintain a single facility in Arizona where you design and sell computer systems. All of your sales are made by mail order or over the Internet. On request, you will send employees to California to install the equipment for your customer.

Training
You provide training services in California related to a specific sale of goods or merchandise.
Example: Your Virginia-based business does not have sales representatives or inventory in California. However, one of your customer service representatives routinely comes to California to provide training on the computer software you sell on CD-ROM.

Leasing
You receive payments from the lease of equipment or merchandise located in California and you have not already paid California sales or use tax on the purchase of that equipment or merchandise.
Example: Your Nevada car dealership leases cars to California residents who drive them in this state. You have no other business connection to California.