Will's Whiteboard: California Sales Tax (in Two Minutes)
- Sales and Use Tax
- April 16, 2014 | Will Frei
California is one of the biggest and baddest states when it comes to sales tax laws. Retailers must contend with complex rates, confusing nexus rules, and an interactive map of shame. Watch this video for a bite-sized overview of sales tax in the Golden State.
Note on intrastate sales: CA businesses only need to collect sales tax in another district if they are "engaged in business" there.
Hi, welcome to Will's whiteboard, I'm Will. Today we're going to talk about California sales tax. California is one of the biggest and baddest states when it comes to sales tax law. Businesses that have to collect there have to keep track of lots of different nuances, and it can be a big pain. What I'm going to do is I'm going to pack as much of that pain as I can into two minutes to give you an overview of what it's like to comply with California sales tax law.
Here we go. What's the sales tax rate in California? Well, across the state the base is 7.5 percent, but with local sales tax it can get as high as 10 percent. Let's talk about sourcing. If you make a sale from one point in
California to another, and you have to collect sales tax, the city, state, and county sales tax rates are sourced at the origin or the ship from address. That's where you get your sales tax rate. The district sales tax
is sourced at the destination ship to address. That's where you get your sales tax rate for that part of it.
Nexus, what if you're an out of state seller and you're selling into the state of California? When do you have to collect? Well. if you have a physical presence in California like a warehouse or distribution center
then you most likely have to collect. In addition, if you work with in state affiliates you may have to collect. Drop shippers if you have Nexus there you also have to collect. Let's talk filing. California is like most
states in that your filing frequency has to do with the amount of revenue you make or the projected amount of revenue.
Finally, shame; what are some big sales tax gotchas in California? Well, according to a recent study by the state the number one sales tax error committed by businesses in California was use tax when a business in
California buys from an out of state business that doesn't collect sales tax and the California business fails to remit use tax to California or does it incorrectly. That's a big error and a big gotcha in this state.
Finally, California has a map of shame on its website where they list the biggest delinquents in the state.
I hope this helps give you an overview of the Golden States sales tax laws and regulations. If you're worried about any of this or have questions I suggest you do more research because sales tax law here can be a bear. Thanks very much, I'll see you next time.