California Sales Tax Guide
Chapter 3: Getting registered to collect California sales tax
The first step toward proper management of California sales tax involves getting registered with the California Board of Equalization. We get a lot of questions regarding this and recognize it may be the most difficult hurdle for small businesses to overcome. Registering to collect sales tax in California means you've acknowledged your legal responsibility to collect and consequently file and remit sales tax to the state.When do I need to register to collect sales tax in California?
There are two ways to think about this question. The first involves a topic called "nexus". Nexus, in the tax world refers to a company's connection to a state. While this connection is typically that of a physical nature (warehouse in the California, inventory in California, etc.), nexus is not limited to a physical presence. There are many nexus triggers we won't delve into here and, more importantly, nexus is often determined by a combination of events rather than a single event.
If it is determined you have nexus in California, the California Board of Equalization has the legal right to require you to collect, file, and pay sales tax.
If you've determined you have nexus in California, the second question involves a topic we call "materiality". In short, you'll want to ask yourself whether the amount of sales tax you are required to collect and remit to the California Board of Equalization is enough to put you at an unacceptable level of penalty and interest risk. As everyone's level of risk tolerance is different, this is a question that can only be answered by you, the business owner.
Prior to selling taxable goods or offering taxable services in California, a business that has established nexus within the state is required to register for an seller's permit.What triggers nexus in California?
Nexus is a complex topic that, depending on your situation, may require the in-depth knowledge of a qualified tax professional. That being said, there are a few common business events and situations that are known to trigger nexus in California. The most common include the following:
- Opening an office in California
- Storing inventory in a warehouse in California
- Having remote employees located in California
Businesses may register for an California seller's permit online by visiting the California Board of Equalization and following the instructions provided.
At this time, California does not allow businesses to register for a seller's permit via paper application. You'll need to visit the California Board of Equalization and complete your registration online.What information is required to register for a California seller's permit ?
When applying for a California seller's permit, there are a number of pieces of information that may be required. These include, but are likely not limited to:
- Business name
- Business entity type
- Description of business activities
- Date business activities began or will begin
- Business address and mailing address
- Business contact information
- The North American Industry Classification System (NAICS) code that best matches your business
- Federal Employer Identification Number (FEIN)
- Your name, Social Security Number (SSN), driver license number, personal address, and personal contact information of owner/sole proprietor
- List of business officers, partners, managing members, and/or trustees
- Employment information (date of hire, number of employees, payroll amounts, payroll agent’s PTIN, if applicable)
The cost to register for a California seller's permit is currently $0.Do I need a Federal EIN in order to register in California?
The California Board of Equalization requires businesses requesting a new seller's permit to supply a valid Federal EIN number during the initial registration process. You can apply for an EIN number online by visiting the IRS website.Which California governement agencies do I need to register with in order to get a new seller's permit?
We recommend you contact the California Board of Equalization to verify which government agencies you will be required to register with. Potential agencies include the following:
- California Department of Revenue
- California State Employment Agency
- California State Department of Labor
- California Local Tax Jurisdictions
Yes! California seller's permit registration is unique to the state of a business. The California Board of Equalization requires all registered businesses to have current business owner name and contact information on file.