In a move that has been expected since June 2018, the California Department for Tax and Fee Administration (CDTFA) has announced that it will begin to collect use tax from out-of-state retailers who make sales to California customers above certain thresholds. The plan is set to go into effect on April 1, 2019.
In our blog dated September 20, 2018, we discussed the pivotal Supreme Court decision in South Dakota v. Wayfair, et. al.
In this article, we discussed South Dakota’s policy, and the decision by the Supreme Court that overturned a 1992 decision that essentially prevented States from assessing sales tax against retailers located entirely outside a particular state. We also predicted that the decision would lead to many States adopting similar policies.
The Wayfair decision did not offer an overwhelming amount of guidance as to how exactly the States could design their tax regime to allow taxation—rather, it analyzed South Dakota’s regime, and stated that it was constitutional.
For this reason, California has opted to pursue the safest route, with the CDTFA announcing that it would seek to collect use tax along the same metrics used by South Dakota.
Beginning April 1, 2019, the CDTFA will require out-of-state retailers to collect use tax if, during either the previous or current calendar years, the retailer has either:
(1) delivered sales to California in excess of $100,000; or
(2) made sales for delivery into California in 200 or more separate transactions
If you operate an out-of-state company that makes sales to California that may meet either metric, you should contact a tax attorney or experience accountant to make sure that you are proactive and establish compliance procedures prior to April 1, 2019.
If you are selected for an audit, or have any questions about the sales tax or any other tax questions, contact CARDIN AND COMPANY, APC today!
Eric J. Schwarberg is an attorney licensed to practice law in the State of California. He possesses a J.D. and an LL.M. in Taxation, both from the University of San Diego School of Law.
THIS BLOG IS PUBLISHED FOR INFORMATIONAL PURPOSES ONLY, IS NOT INTENDED AS LEGAL ADVICE, AND DOES NOT FORM AN ATTORNEY-CLIENT RELATIONSHIP.