California to Tax Out-of-State Online Sellers After Wayfair
Following the Supreme Court's Wayfair decision, California will require remote sellers with over $100,000 in sales or 200 transactions into the state to collect and remit sales tax starting April 1, 2019.
Responding to the U.S. Supreme Court's landmark decision in South Dakota v. Wayfair, the California Department of Tax and Fee Administration has announced it will require out-of-state retailers to collect and remit state sales and use tax beginning April 1, 2019. The Wayfair ruling overturned the long-standing physical-presence requirement for sales tax nexus, expanding states' authority to tax remote sales.
This policy shift has immediate and significant compliance implications for e-commerce and other businesses nationwide that sell into California, the largest consumer market in the United States. Companies without a physical presence in the state must now assess whether they meet the new economic nexus thresholds: more than $100,000 in sales or 200 separate transactions for delivery into California within the current or preceding calendar year.
Affected retailers must register with the state and implement systems to manage tax collection and remittance by the deadline. The rule is not retroactive. Counsel should advise clients to evaluate their sales data immediately to ensure compliance and monitor similar impending announcements from other states, which are expected to follow California's lead.