Back in June, the U.S. Supreme Court issued a decision in South Dakota v. Wayfair, Inc. that reversed Quill‘s requirement for physical presence to establish sales tax nexus for out-of-state businesses. Individual states are now hurrying to decide upon economic or transactional thresholds to govern who should be collecting and paying over sales tax concerning primarily e-commerce sales.
South Dakota, whose suggested thresholds are $100,000 in sales or 200 transactions, will meet in a special legislative session on September 12, 2018 to discuss implementation of the new standard. Michigan recently released an administrative bulletin determining that it will certainly follow the same thresholds ($100,000 or 200 transactions). California’s initial draft requirements were potentially the same, but more recent whispers point to a $500,000 sales threshold for economic nexus with our state. This would be more in line with the existing regulations under R&TC Sec. 23101.
If you are a remote seller to customers in California, and have not yet begun collecting and remitting sales tax, you may want to consider getting into compliance now, before the new regulations are enforced. The California Department of Tax and Fee Administration (CDTFA) has an out-of-state voluntary disclosure program, as well as a Managed Audit Program, to minimize penalties and encourage compliance.
To discuss your company’s options for sales and use tax disclosures to California, contact one of our attorneys today.