California joins the list of states to introduce online sales tax law


California is the latest US state to introduce online sales tax law which comes into effect from 1st of April. The policy is requiring out-of-state sellers to collect tax from buyers. The law states that it will likely affect in-state businesses as well.

The online sale tax law allows an exception for small sellers. Out-of-state sellers must have more than $100,000 in taxable sales in California or at least 200 retail sales for delivery in the state in the current or preceding calendar year before a tax collection obligation kicks in. Once the threshold is reached at the state level, out-of-state merchants are required to register with the CDTFA and collect and remit the state and mandatory state tax on their sales into the state. That rate is currently 7.25%.

The law also requires both out-of-state sellers and in-state sellers to collect additional sales and use taxes per applicable county, local, and district taxes when they surpass the threshold.

The problem is that 200 sales for marketplace sellers are a low amount which means that many merchants will have to collect the tax not only on Amazon, eBay and other marketplaces but also their own websites.

Sellers can assess online sales tax law guide here to see whether they’re required to tax their buyers.