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October 27, 2019

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California Sales Tax Collection Law Changes

May 27, 2019

As you may have heard, last summer the United States Supreme Court ruled on the case of South Dakota vs Wayfair, Inc. and ruled in favor of South Dakota.  The ruling was ground breaking in that it overturned decades of precedent regarding the collection of sales tax on interstate sales of tangible property.  South Dakota's law required any out of state business with sales to its residents exceeding either $100,000 or 200 transactions to collect sales tax on those sales.

 

With regards to the State of California, the California Department of Fee and Tax Administration initially adopted a rule similar to South Dakota's standard effective April 1, 2019.  However, on April 25, 2019 the state assembly passed, and Governor Newsome signed, a superseding law for sales tax collection increasing the dollar threshold for out of state businesses to $500,000.  This law also applies to district tax collection (the county and city portion of the tax).

 

It should be noted that businesses located within California must collect sales tax on all sales within the state regardless of their total sales.  Conversely businesses with interstate operations should be cognizant of the sales tax laws of the states in which their customers reside as states have been changing their laws in this area since the Wayfair case.  We recommend that in light of the changing laws, that businesses with sales of property (or services) to customers across multiple states perform a sales tax study to ensure compliance with this expanding area of law.

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