Client Alert

California Enacts Remote Seller and Marketplace Facilitator Sales and Use Tax Legislation

26 Apr 2019

On April 25, 2019, California Governor Gavin Newsom signed remote seller and marketplace facilitator sales and use tax legislation with a threshold of $500,000 of sales of tangible personal property, regardless of the number of sales transactions within California.

Under the new law, out of state retailers and related parties making more than $500,000 of total combined sales of tangible personal property for delivery into California will be required to collect and remit sales and use tax based on a retroactive effective date of April 1, 2019. This legislation replaces the current administrative guidance issued by the California Department of Tax and Fee Administration (DTFA), which had imposed a threshold of $100,000 of sales or 200 transactions, effective April 1, 2019. Retailers will be required to collect local district tax based on the tax rate in the destination district, rather than requiring nexus with each district as provided under prior law.

In addition, effective October 1, 2019, marketplace facilitators will be required to collect and remit California sales and use tax on California sales made by their third party marketplace sellers if the marketplace facilitator has California sales and use tax nexus based on a physical presence within California or meets the new $500,000 sales threshold based on a combination of its own sales and the sales of its third party marketplace sellers.

Beginning April 1, 2019, the legislation also provides the DTFA with discretion to provide penalty and interest relief on use tax liabilities for retailers not previously required to be registered for California sales and use tax collection.

Please contact Mitchell A. Newmark and William H. Gorrod with any questions.

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