On April 25, 2019, the Governor of California approved Assembly Bill No. 147, which sets the economic nexus threshold at $500,000 in sales or deliveries to California, cumulative over 12 months. This will come as some relief to many out-of-state retailers affected by last year's U.S. Supreme Court case, South Dakota v. Wayfair, Inc., the case that overturned the long-standing principle set in Quill Corp. v. North Dakota requiring physical presence for a retailer to be subject to state sales and use taxes.
The new, higher economic nexus threshold takes effect as of April 1, 2019. Relief may be granted to certain retailers for interest and penalties imposed on use tax liabilities incurred between April 1, 2019 and December 31, 2022.
AB 147 also specifies that, as of October 1, 2019, marketplace facilitators will be considered the seller and retailer for each sale made through its marketplace, and will be required to register with the CDTFA and collect and remit sales tax on those sales.
"Marketplace facilitator" is defined as the person who:
- Facilitates the sale of products for a seller; and
- Operates the marketplace, directly or indirectly (such as communicating offers between the buyer and seller, providing virtual currency for product purchases, or developing software or infrastructure to house the marketplace); and
- Engages in activities related to the seller's products, directly or indirectly (such as providing payment processing services, setting prices, taking orders, or providing customer service or return assistance).