State Sales Tax Nexus and General Overview

Need to Understand a State's Sales Tax Situation? Here it is...

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California (CA)

CA Sales Tax - Name of Tax and General Application:

California imposes a tax on the privilege of selling tangible personal property in the state.  This tax is referred to as a "sales tax." In addition to the sales tax, California imposes a tax on the storage, use, or consumption of tangible personal property. This tax is referred to as a "use tax." Only one tax will apply to a particular item in California; both sales and use tax will not be paid on the same piece of tangible personal property.

CA Nexus - General Requirements:

The word "nexus" means a link or connection. If you are determined to have nexus to a U.S. state then you are subject to that state's sales and use tax rules and must collect and remit sales tax to the state. This is known as a "filing obligation."

Each state has a different definition of nexus. However, if the answer to any of the following questions is yes, it is likely that a company has nexus as legally defined in most U.S. States.

Does the company own property in the state? Does the company have employees living in the state? Does the company regularly send employees in the state to perform services? Does the company have an agent acting on behalf of the company in the state?

In California, nexus applies for businesses that have an agent or representative in the state who makes sales, takes orders, installs merchandise, trains customers, or makes deliveries. However, a telecommuting employee does not itself create nexus. Businesses that own tangible personal property (including the ownership of licensed software) in California have nexus.

Trade show attendance in California does not create nexus when (1) the business's sole physical presence in the state is to engage in convention and trade show activities; (2) it does not engage in those activities for more than 15 days during a 12-month period; and (3) it did not derive more than $100,000 of net income from those activities in the state during the prior calendar year. Regardless of whether a business has nexus, the retailer must collect tax on any sales made at the trade show or pursuant to orders taken at the show.

CA Local Tax - Do Localities Impose Tax?

Yes, California imposes local sales tax.

CA Resale Certificate Renewal Agreements:

In California resale certificates are provided by the purchaser to the seller and can be in the form of a note, letter or memorandum although it must contain certain information including: name and address of purchaser, description of the property being purchased, a statement describing the property as for resale, etc.

CA Resale Certificate Renewal Periods

In California, the resale certificate is valid until revoked in writing.

CA Statute of Limitations

Later of three years from the end of the calendar month following the quarterly period for which the assessment relates or from the date the return was filed. This limitation does not apply to fraudulent filings.