California: Sales Tax Handbook
What constitutes sales tax nexus in California?
One of the more complicated aspects of California sales tax law is sales tax nexus, the determination of whether a particular sale took place within the taxation jurisdiction of California, and is thus subject to state (and possibly local) sales taxes.
If a vendor's transactions are determined to have nexus in California, the vendor must register for a California sales tax license and collect appropriate sales taxes from the buyer for all transactions with nexus in the state. On this page, we have compiled some of the most commonly needed facts about what constitutes sales tax nexus in California.
Sales Tax Nexus in California
California law declares that any retailer "engaged in business within California" has tax nexus within the state.
Activities that are considered "engaging in business" include, but are not limited to having a physical facility within California, storing goods within California, having personnel within the state (including salespeople, contractors, or anyone engaged in the sale of tangible property), or having a presence at a tradeshow (in some cases).
If you have an affiliate within the state, and generate over $10,000 in affiliate-driven sales and $1M in in-state sales, "click-through nexus" is established and you are considered to have tax nexus within California. This legislation was specifically targeted at Amazon and similar large online retailers.
For additional details on sales tax nexus law in California, see the nexus information page from the Board of Equalization at http://www.boe.ca.gov/lawguides/business/current/btlg/vol1/sutl/6203.html
Taxation of Internet-Based Sales in California
NOTE: 2018 Supreme Court Ruling Regarding Online Sales Taxes
In the 2018 Supreme Court case South Dakota vs. Wayfair Inc, Et Al., the court overturned a previous ruling that required a merchant to have physical nexus in order for a state to collect sales tax. This means that any state is now free to enforce collection of sales taxes on out-of-state online merchants. The information provided here may be subject to change, and many states are expected to begin collecting online sales taxes following this ruling.
Depending on the situation, California may or may not charge sales tax on Internet-based transactions. In California, the click-through (and affiliate) nexus provisions were put into effect as of September 15, 2012.
The nexus status and taxability of Internet-based sales, by vendors and/or consumers within California, have been the subject of hot debate in recent years. You can learn more on our introduction to Internet-based sales taxes.
Does my business have tax nexus in California?
The folks at the sales tax compliance company Avalara are an approved California sales tax partner, and you can use their free California nexus wizard tool to determine whether or not your business has nexus, and is therefore required to pay California sales taxes. If you're interested in automating your sales tax collection and filing process, click here to get more information.
Back to California Sales Tax Handbook Top