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California Amazon Sales Tax Enacted


California Assembly Bill No. 155 (A155) was approved by the Governor September 23, 2011. The Bill defined rules and regulations to enable California State to require internet retailers and online sellers to collect and remit sales tax to the state.

A155 states:

  • If federal law is enacted on or before July 31, 2012, authorizing the states to require a seller to collect taxes on sales of goods to in-state purchasers without regard to the location of the seller, and the state does not, on or before September 14, 2012, elect to implement that law, Section 3 of this act shall become operative on January 1, 2013, and Section 2 of this act shall become inoperative on that same date.
  • If federal law is not enacted on or before July 31, 2012, authorizing the states to require a seller to collect taxes on sales of goods to in-state purchasers without regard to the location of the seller, Section 3 of this act shall become operative on September 15, 2012, and Section 2 of this act shall become inoperative on that same date.

Federal law has not been enacted as of July 31, 2012, so Section 3 becomes operative on September 15, 2012. Section 3 states:

…every retailer engaged in business in this state and making sales of tangible personal property for storage, use, or other consumption in this state, not exempted under Chapter 3.5 (commencing with Section 6271) or Chapter 4 (commencing with Section 6351), shall, at the time of making the sales or, if the storage, use, or other consumption of the tangible personal property is not then taxable hereunder, at the time the storage, use, or other consumption becomes taxable, collect the tax from the purchaser and give to the purchaser a receipt therefor [sic] in the manner and form prescribed by the board.

Section 3 (5) (A) further defines enabling the state to require collection duties of online retailers by stating:

Any retailer entering into an agreement or agreements under which a person or persons in this state, for a commission or other consideration, directly or indirectly refer potential purchasers of tangible personal property to the retailer, whether by an internet-based link or an Internet Web site, or otherwise, provided that both of the following conditions are met:

(i)  The total cumulative sales price from all of the retailer’s sales, within the preceding 12 months…is in excess of ten thousand dollars ($10,000).

(ii) The retailer, within the preceding 12 months, has total cumulative sales…in excess of one million dollars ($1,000,000).

Section 3 (5) (B) also defines the following activities as creating nexus:

  • The retailer purchasing advertisements from someone in the state for television, radio, print, Internet or other medium.

To avoid the association, a retailer must “…demonstrate that the person in this state with whom the retailer has an agreement did not engage in referrals in the state on behalf of the retailer that would satisfy the requirements of the commerce clause of the United States Constitution.”

The California Code of Regulations, Title 18, Section 1684 has been updated to reflect the lack of passage of a federal solution to the internet retailer and sales tax dilemma. Retailers doing business in California should review the nexus rules going into effect September 15, 2012 to ensure they remain compliant with California state law.

References

California Code of Regulations, Title 18, Section 1684

Assembly Bill 155

Cal. Rev. & Tax. Cd 6203

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Avalara Author
Susan McLain
Avalara Author Susan McLain
Susan McLain began her career as a technical writer in technology industries such as satellite networking and medical devices. Her skills encompass technical and marketing writing, usability engineering, verification and validation testing and protocol writing, requirements development, business analysis, technical illustration/graphic design and marketing. She has owned her own business providing service to small to medium sized business and in other positions, she has been in project management, documentation and marketing. She is currently the content specialist for Avalara helping to “make sales tax less taxing.”