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US California sales tax on out-of-state e-commerce

  • Apr 29, 2019 | Richard Asquith

California approved on 25 April legislation to make out-of-state retailers liable to charge and collect sales tax on consumer sales. The extension of the tax net to non-resident e-commerce sellers is backdated to 1 April 2019.

There is an annual sales threshold of $500,000 per annum. This legislation adopts a larger threshold than that proposed by the California Department of Tax and Fee Administration. In Special Notice L-565, published in December 2018, it proposed a threshold of $100,000 in sales or 200 separate transactions.

Marketplaces will also be obliged to collect sales tax on behalf of their out-of-state third-party sellers from 1 October 2019.

This follows the 2018 South Dakota v Wayfair ruling which changed from the physical presence rule to the ‘economic nexus’. This establishes an obligation to charge and remit sales tax even if the merchant has no staff, premises of other presence in consumer’s state. Since then, 33 states have adjusted their laws to reflect Wayfair.

The Wayfair obligations across all states also apply to non-US resident sellers passing the annual selling thresholds.

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VP Global Indirect Tax
Richard Asquith
VP Global Indirect Tax Richard Asquith
Richard Asquith is VP Global Indirect Tax at Avalara, helping businesses understand their compliance obligations as they grow globally. He can be contacted at: richard.asquith@avalara.com. He is part of the European leadership team which won International Tax Review's 2020 Tax Technology Firm of the Year. Richard trained as an accountant with KPMG in the UK, and went on to work in Hungary, Russia and France with EY.
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