Also, when California imposed a state sales/use tax collection obligation (effective April 1) on out-of-state sellers with more than $100,000 in sales or at least 200 transactions in the state in the current or preceding calendar year, it also required in-state and out-of-state sellers to collect and remit district sales/use tax in any district where they surpassed the $100,000 sales/200 transactions threshold.
Here's the clincher that has created a real headache for a lot of sellers. The law that was enacted April 25 retroactively supersedes the previous April 1 rule. So, as of April 1, the transaction threshold is eliminated, and the sales threshold is now increased to $500,000.
The new law also eliminates the need to track sales in each district. And, starting October 1, 2019, it requires marketplace facilitators to collect sales/use tax on behalf of third-party sellers.
To be fair, the changes adopted by the legislature should make sales tax compliance a bit simpler for in-state and out-of-state sellers alike. While many businesses are undoubtedly pleased with the new policy, the fact that California adopted one set of rules/requirements as of April 1, changed them weeks later (as of April 25), and set more changes for the not-too-distant future is frustrating.
Thanks for the mention, Eli. I work for Avalara on their social media team. We are staying on top of these changes and I wanted to share this clarification.
More than a dozen states impose a sales tax collection obligation on marketplace facilitators (Amazon, Etsy, eBay, etc.). In addition to collecting and remitting tax on their own sales into the state, if they have any, marketplace facilitators will soon be responsible for collecting and remitting sales tax on all sales made through the marketplace in even more states. Most recently, Wyoming and California have joined the ranks; Virginia is close, which we expect to be on the books by the middle of this year. We anticipate every state to have a law like this on the books by Q1 of 2020.
Where I see a lot of confusion is from sellers who are struggling to understand economic nexus regulations that are based on reaching sales thresholds. Adding to the confusion, these thresholds vary from state-to-state.
If you'd like to learn more, our recent blog "How marketplace facilitator sales tax laws in different states affect marketplace sellers" covers this in depth. https://avlr.co/2VFKvCa Here’s an excerpt:
"Now that states are no longer prohibited from taxing remote sales, they’re looking for the most efficient ways to bring in remote sales tax revenue. Approximately 35 states have adopted economic nexus laws, which impose a sales tax collection obligation on businesses with significant economic activity in the state. Such economic nexus laws generally provide an exception for small sellers (defined differently in different states).
Many marketplace sellers qualify for these small seller exceptions, meaning they’re safe from the long arms of the tax authorities. But states that require marketplace facilitators to collect and remit sales tax on behalf of their sellers still reap revenue from those transactions. It’s a win-win for states, which is why we can expect to see marketplace facilitator sales tax laws proliferate.
It’s important to note that marketplace sellers aren’t necessarily freed from all responsibilities under these laws. In fact, these laws can complicate matters a bit because they change the rules. Ordinarily, businesses that don’t have nexus with a state (an obligation to collect sales tax) don’t have reporting requirements. That’s not the case with all marketplace facilitator sales tax laws, as you’ll see below."
Also, when California imposed a state sales/use tax collection obligation (effective April 1) on out-of-state sellers with more than $100,000 in sales or at least 200 transactions in the state in the current or preceding calendar year, it also required in-state and out-of-state sellers to collect and remit district sales/use tax in any district where they surpassed the $100,000 sales/200 transactions threshold.
Here's the clincher that has created a real headache for a lot of sellers. The law that was enacted April 25 retroactively supersedes the previous April 1 rule. So, as of April 1, the transaction threshold is eliminated, and the sales threshold is now increased to $500,000.
The new law also eliminates the need to track sales in each district. And, starting October 1, 2019, it requires marketplace facilitators to collect sales/use tax on behalf of third-party sellers.
To be fair, the changes adopted by the legislature should make sales tax compliance a bit simpler for in-state and out-of-state sellers alike. While many businesses are undoubtedly pleased with the new policy, the fact that California adopted one set of rules/requirements as of April 1, changed them weeks later (as of April 25), and set more changes for the not-too-distant future is frustrating.