Your business has California sales tax nexus if you sell more than $500,000 of tangible goods delivered into California in the current or prior calendar year, or if you have any physical presence in the state. Either one triggers an obligation to register with the California Department of Tax and Fee Administration (CDTFA) and collect sales tax from your California buyers. Physical presence works at any sales volume; the $500,000 figure is the trigger for remote sellers with no footprint in the state.
The $500,000 Economic Threshold
Under Revenue and Taxation Code Section 6203(c)(4), a remote seller has nexus if combined sales of tangible personal property delivered into California exceed $500,000 in either the current or preceding calendar year.1California Department of Tax and Fee Administration. California Code Revenue and Taxation Code 6203 – Collection by Retailer California adopted this standard through AB 147 in 2019.
Three features of the calculation trip people up. First, the threshold counts all tangible personal property sales, taxable and exempt alike. Second, sales you make through marketplace platforms like Amazon or Etsy count toward your total, even though the platform is collecting tax on those sales for you.2California Department of Tax and Fee Administration. Sales and Use Tax Law – Chapter 1.7 Third, if your business has related entities as defined under Section 267(b) of the Internal Revenue Code, California combines the sales of all related persons when measuring against the threshold.1California Department of Tax and Fee Administration. California Code Revenue and Taxation Code 6203 – Collection by Retailer
There is no transaction-count trigger. Dollars are the only measure. Once you cross the line, your collection obligation begins on the first day of the following month.
Physical Presence in California
A physical footprint creates nexus at any sales volume, even one dollar. Revenue and Taxation Code Section 6203(c)(1) through (3) covers three categories:
- A place of business in California: an office, retail store, warehouse, distribution center, sample room, or any other location you own, lease, or use, even temporarily.
- People working on your behalf in California: employees, sales representatives, agents, independent contractors, or solicitors operating under your authority to sell, deliver, install, or take orders.
- Tangible personal property you lease to customers located in California.
The warehouse provision matters most for e-commerce sellers. If you use a third-party fulfillment service that stores your inventory in a California facility, that inventory is your physical presence, even if you have never set foot in the state.1California Department of Tax and Fee Administration. California Code Revenue and Taxation Code 6203 – Collection by Retailer
Trade Shows Are a Narrower Exception Than It Looks
Attending a trade show in California does not automatically create year-round nexus, but the exception has hard limits. You avoid general nexus from trade show activity only if you attend for fewer than 15 days total in any 12-month period and earned less than $100,000 in net income from those activities in the prior calendar year. Exceed either limit and you have full nexus.1California Department of Tax and Fee Administration. California Code Revenue and Taxation Code 6203 – Collection by Retailer
Even inside those limits, you still have to collect tax on any sale you actually make at the show or any order taken during the event. The exemption keeps you from becoming a year-round collector; it does not excuse you from collecting on the spot.
Marketplace Sales
Since October 1, 2019, California law treats marketplace facilitators as the retailer for all sales made through their platforms. A marketplace facilitator is any platform that connects buyers and sellers and also handles at least one of the following: payment processing, fulfillment, listing products, setting prices, or taking orders.2California Department of Tax and Fee Administration. Sales and Use Tax Law – Chapter 1.7 Amazon, eBay, Etsy, and Walmart Marketplace all qualify.
When a qualifying marketplace handles your sale, the platform collects and remits California sales tax on that transaction. You generally do not collect tax separately on those sales. The catch: those marketplace sales still count toward your own $500,000 threshold. If you sell $400,000 through Amazon and $150,000 through your own website, your combined $550,000 crosses the line, and you are responsible for collecting tax on the direct website sales yourself.2California Department of Tax and Fee Administration. Sales and Use Tax Law – Chapter 1.7
One boundary worth stating directly: California’s old affiliate and click-through nexus rules no longer apply. AB 147 repealed them in 2019 when it replaced them with the $500,000 standard. If California-based affiliates promote your products but your sales into the state stay under $500,000 and you have no physical presence, you do not have nexus. The old $10,000 referral threshold is gone.1California Department of Tax and Fee Administration. California Code Revenue and Taxation Code 6203 – Collection by Retailer
What to Do Once You Have Nexus
Register with the CDTFA for a seller’s permit before making taxable sales. Registration is free and can be completed online.3California Department of Tax and Fee Administration. Obtaining a Seller’s Permit The CDTFA may require a security deposit to cover potential unpaid taxes if your business later closes, but the permit itself costs nothing.
Collect tax on every taxable sale at the rate for the buyer’s delivery address. California’s base statewide rate is 7.25%, and most areas add local district taxes ranging from 0.10% to 2.00%, which can push the total above 10% in some cities.4California Department of Tax and Fee Administration. California City and County Sales and Use Tax Rate Information The CDTFA publishes a rate lookup tool on its website.5California Department of Tax and Fee Administration. Know Your Sales and Use Tax Rate
The CDTFA assigns your filing frequency based on reported sales volume. Most sellers file quarterly; higher-volume sellers file monthly or make quarterly prepayments, and very small sellers may file annually. Returns and payments are due on the last day of the month following the reporting period.
Penalties, and What to Do If You Are Already Behind
Filing or paying late costs you a 10% penalty on the unpaid amount.6California Legislative Information. California Revenue and Taxation Code 6591 Interest also runs from the original due date to the date you pay, calculated at the federal underpayment rate plus three percentage points and adjusted twice a year.7California Department of Tax and Fee Administration. Regulation 1703
The exposure gets much larger if you collected tax from customers but did not remit it. Knowingly holding onto collected tax triggers a 40% penalty on the amount not sent in, on top of the 10% base penalty and accrued interest.7California Department of Tax and Fee Administration. Regulation 1703
If you realize you should have been collecting California sales tax and were not, register with the CDTFA as soon as possible. Voluntary disclosure generally results in better treatment than waiting for the state to find you, and the CDTFA has historically offered relief programs for retailers who come forward on their own, with terms that vary by program.