California – FAQs Regarding Nexus for Out-Of-State Retailers

SALT Report 1223 – The California State Board of Equalization has updated their frequently asked questions (FAQs) section regarding sales and use tax nexus for out-of-state retailers.  Assembly Bill x1 28 (ABx1 28) was enacted on June 28, 2011, and expanded the types of out-of-state retailers that are required to register with the Board of Equalization to collect and remit California use tax on their sales to California customers.

A.B.x1 28

A.B.x1 28 expanded the use tax registration requirements so that they apply to some out-of-state retailers, including Internet retailers, that were previously not required to register with the BOE to collect and remit use tax on their sales of tangible personal property to California customers.

Among other things, A.B.x1 28 provided that a retailer is considered engaged in business in California and required to register with the BOE to collect and remit use tax if the retailer had a specified agreement or agreements with a California affiliate during the preceding 12 months and has:

  • Total cumulative sales of tangible personal property to customers in California that were referred to the retailer through affiliates in excess of $10,000; and
  • Total cumulative sales of tangible personal property to customers in California in excess of $500,000

A.B. 155

On September 23, 2011, Assembly Bill 155 (AB 155) was signed into law and:

  • Retroactively repealed the expanded registration requirements of A.B.x1 28
  • Reenacted the expanded registration requirements of A.B.x1 28 with one change; and
  • Increased the total cumulative sales threshold amount from $500,000 to $1,000,000

The operative date of A.B. 155 will be determined as follows:

If a federal law that authorizes states to require retailers to collect use taxes on sales of goods to in-state purchasers without regard to the location of the retailer is not enacted on or before July 31, 2012, then the provisions of A.B. 155 that reenacted the provisions of A.B.x1 28 will become operative September 15, 2012.

If a federal law is enacted on or before July 31, 2012, and California does not elect to implement that law on or before September 14, 2012, then the provisions of A.B. 155 that reenacted the provisions of A.B.x1 28 will become operative January 1, 2013.

Current Registration Requirements

The current registration requirements for out-of-state retailers making sales to California customers remain the same as they were on June 27, 2011, prior to the June 28, 2011 effective date of A.B.x1 28, until the new requirements reenacted by A.B. 155 become operative on September 15, 2012, or January 1, 2013.

If a taxpayer was required to be registered to collect use tax on June 27, 2011, and there has been no change in the taxpayer’s connections to California, then there is no change to that taxpayer’s registration and reporting obligations as a result of this legislative activity.

Currently, §6203 of the Revenue and Taxation Code provides that an out-of-state retailer making sales of tangible personal property to California customers is engaged in business in California and required to register with the BOE to collect California use tax if:

  • The retailer is maintaining, occupying, or using, permanently or temporarily, directly or indirectly, or through a subsidiary or agent, by whatever name called, an office, place of distribution, sales or sample room or place, warehouse or storage place, or other place of business in California
  • The retailer has any representative, agent, salesperson, canvasser, independent contractor, or solicitor operating in California under the authority of the retailer or its subsidiary for the purpose of selling, delivering, installing, assembling, or the taking of orders for any tangible personal property; or
  • The retailer derives rentals from a lease of tangible personal property in California

For Further Information:

California State Board of Equalization – Frequently Asked Questions