Wayfair v. South Dakota changed a lot regarding sales tax and online stores, and true to many predictions, California is now leading the charge by introducing a new state law requiring out-of-state sellers to pay sales tax, come April 2019.
The first sales tax law to apply directly to online retailers, set to take place April 1st, any out-of-state seller must begin collecting sales tax if either A) sales in California exceed $100,000, or B) over 200 separate transaction and deliveries to customers in California have been made within a calendar year.
For local sales taxes, California will keep the same economic nexus thresholds for each district.
If you’re wondering why California’s new sales tax threshold is the same as South Dakota, according to Scott Peterson, vice president of U.S. tax policy and government relations at Avalara, there’s a reason for that. “The Supreme Court’s Wayfair decision didn’t provide a lot of guidance for states,” Peterson says. “Like most states, California is taking the safe position and adopting the same thresholds as South Dakota.”
Regardless, this is a big step – and not just for California, either, but the entire nation.
As one of the largest states, California’s decision will affect many, while it’s only a matter of time before other big states like Texas, New York, and Florida offer their own versions of the regime.
“Obviously, having the largest state make an announcement is a significant development,” Peterson explains again. “Lots of sellers haven’t had to take economic nexus too seriously because many of the current economic nexus states are small. Since California is the No. 1 customer location for just about every national seller, this announcement will incentivize many more sellers to take the issue seriously.”