Publication 77, Out-of-State Sellers: Do You Need to Register with California?

February 2014

Do I need to collect California sales and use tax when my business is located outside the state?

You may. If you are a retailer based outside California, you are required to pay California sales or use tax on all sales of merchandise to California customers if you are ”engaged in business“ in the state. If you are engaged in business in this state, you must register and pay sales and/or use tax.

Even if you are not engaged in business in this state, you may voluntarily apply for a Certificate of Registration—Use Tax. If you hold such a certificate, you will be required to collect and pay tax from purchasers in the same manner as retailers engaged in business in this state. Your obligation to pay tax will continue until you close out your Certificate of Registration—Use Tax. If you don‘t register to collect and pay the tax, your customers are responsible for the tax on their purchases and must pay it directly to the state.

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Note: This publication summarizes the law and applicable regulations in effect when the publication was written, as noted on the cover. However, changes in the law or in regulations may have occurred since that time. If there is a conflict between the text in this publication and the law, decisions will be based on the law and not on this publication.

Engaged in Business

Am I engaged in business in California?

  • You are engaged in business in this state and required to register and pay tax if any of the following situations apply to your business:

1. Business location in California

You maintain, occupy, or use, directly or indirectly, or through a subsidiary or agent, a permanent or temporary office, place of distribution, sales or sample room, warehouse or storage place, or other physical place of business in California.

2. Representative in California

You have a representative, agent, or independent contractor operating in the state on your behalf or under your authority, or under the authority of your subsidiary, for the purpose of making sales, taking orders, installing merchandise, training customers, or making deliveries.

3. Lease property in California

You receive rental payments from the lease of personal property that is located in California, such as leases of machinery, equipment, and furniture. For more on leases, see our publication 46, Leasing Tangible Personal Property.

4. Real or Personal Property

You own or lease real property or personal property located in California such as machinery, equipment and furniture including, but not limited to a computer server in California.

5. Affiliates

You have agreements with persons operating in California who solicit and refer potential customers to you by an Internet-based link, Internet website, or otherwise, and who receive compensation based on completed sales, under specified circumstances, provided:

  • You have $10,000 in sales to California customers through referrals from California-based affiliates, and
  • You sold more than $1 million in products to California consumers in the preceding 12 months.

**Learn more about affiliate nexus, including examples, an exception to the affiliate-nexus provisions, and the certification you need to obtain to support the exception.

**Also see subdivision (c)(3) of Regulation 1684, Collection of Use Tax by Retailers

6. Commonly Controlled Group and Combined Reporting Group

You are a member of a commonly-controlled group and combined reporting group in which a member of the commonly-controlled group performs services for you in California that help you establish or maintain a California market for sales of products. This includes the design and development of products you sell, or solicitation of sales of personal property on your behalf.

**Learn more about commonly-controlled group and combined reporting group nexus.

**Also see Subdivision (c)(2) of Regulation 1684, Collection of Use Tax by Retailers

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Examples of Situations that Require California Sales or Use Tax Registration

Stocks of Merchandise

If you make sales both in and outside of California, at least one permit must be held when you maintain stocks of merchandise in this state. You are also required to hold permits for warehouses or other places in California where merchandise is stored or delivered from, or from which sales are fulfilled in this state. This is true even if the merchandise is used to fulfill your sales made outside California.

Note: You are not required to hold a seller’s permit if all of your sales are made exclusively in interstate or foreign commerce.

Installations

You provide installation services in California for property you sell using your own employees or independent contractors. (See California Revenue and Taxation Code section 6203(c)(2).)

Example: You maintain a single facility in Arizona where you design and sell computer systems. All of your sales are made by mail order or over the Internet. On request, you will send employees to California to install the equipment for your customer.

Training

You provide training services in California related to a specific sale of goods or merchandise.

Example: Your Virginia-based business does not have sales representatives or inventory in California. However, one of your customer service representatives routinely comes to California to provide training on the computer software you sell on CD-ROM.

Leasing

You receive payments from the lease of equipment or merchandise located in California and you have not already paid California sales or use tax on the purchase of that equipment or merchandise.

Example: Your Nevada car dealership leases cars to California residents who drive them in this state. You have no other business connection to California.

Not Required To Register

You are not engaged in business in California and generally are not required to register to pay California sales and/or use tax solely based on one or more transactions illustrated in the following examples:

1. Convention and Trade shows Activities

You are physically present in California only:

  • To participate in convention and trade show activities for not more than 15 days during any 12-month period, and
  • During the prior calendar year, you did not earn more than $100,000 of net income from those activities in this state.

However, if you sell merchandise at the trade show, or take orders for merchandise delivered later to California customers, you must pay tax on those sales.

If you qualify for this trade show exception, you may register to obtain a temporary permit to sell products at the qualifying trade shows and you are responsible for the tax due with respect to sales you make or orders you take at the trade shows.

If you are not engaged in business in this state, you may instead decide to apply for a Certificate of Registration—Use Tax. If you hold such a certificate, you will be required to collect and remit tax from purchasers in the same manner as retailers engaged in business in this state. Your obligation to remit tax will continue until you close out your Certificate of Registration—Use Tax.

2. Shipping by Common Carrier

Your only connection with California is to ship products to customers by U.S. Mail or other common carrier.

3. Internet (Web)

The only connection you have in California is the use of a computer server on the Internet or an Internet Service Provider to create or maintain a webpage or site, provided you donít own or lease the computer server that is located in California.

4. Online Advertising

Your only connection with California is the posting of “click-through” ads or other types of online ads that provide a link to your website on other personsí websites. Online advertising generated as a result of generic algorithmic functions that are anonymous and passive in nature, such as ads tied to Internet search engines, banner ads, click-through ads, Cost Per Action ads, links to retailers’ websites, and similar online advertising services, are considered advertisements and not solicitations.

5. Warranty and Repair Services

Your only connection is the use of a representative or independent contractor in California to perform warranty or repair services for the products you sell provided that the ownership of the representative or independent contractor and your business is not substantially similar.

Affiliate Nexus

Find a California Tax Rate by Address

Contact us:

Visit our website at: www.boe.ca.gov
Customer Service Center: 1-800-400-7115 (TTY:711)
To speak to a representative: Call between 8:00 a.m. and 5:00 p.m. (Pacific time), Monday-Friday, except state holidays.

Taxpayers’ Rights Advocate

Call toll-free for help with problems you have not been able to resolve through normal channels: 1-888-324-2798.

Board Member contact information: www.boe.ca.gov/members/board.htm

Law References

Revenue and Taxation Code Section 6203, Collection by Retailer

Regulation 1684, Collection of Use Tax by Retailers

Publications

100 Shipping and Delivery Charges

105 District Taxes and Delivered Sales

109 Internet Sales

110 California Use Tax Basics

116 Sales and Use Tax Records