CORPORATE LAW – Sale and Use Tax on Remote Retailors with Sale over $500k

CORPORATE LAW – Sale and Use Tax on Remote Retailors with Sale over $500k

March 12, 2019

Assembly Bill 147 has been introduced by two California lawmakers, in response to the US Supreme Court’s June decision in South Dakota v. Wayfair, Inc., 138 S. Ct. 2080 (2018). In this landmark case the Court held that the State of South Dakota was not prohibited under the Commerce Clause of the U.S. Constitution from enacting legislation which required remote sellers to collect and remit sales tax on goods and services sold to buyers for delivery in South Dakota, even though the business that made the sale did not have a physical presence in the State. Below is a link to Assembly Bill 147:

https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201920200AB147

If the California proposed legislation, passes remote retailors would be required to collect and remit state use taxes when they make $500,000 or more in annual sales to the State.  What does this mean for Corporations that meet the $500,000 net sale barrier? Simply stated a remote retailer that contracts with in-state entities and person(s), would be deemed to be “engaged in business in California” when it has $500,000 in annual in-state sales and otherwise would be subject to California Sales and Use Tax.

California Department of Tax and Fee Administration (CDTFA) has information on Sales & Use Tax in California on the website: https://www.cdtfa.ca.gov/taxes-and-fees/sutprograms.htm

If you have an e-commerce presence or corporation and have questions about the proposed Assembly Bill 147 or California’s Sales and Use Tax please feel free to contact one of our Corporate Compliance Attorney’s at 619-432-5145.