Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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Annotation 220.0275

220.0275 Trailing nexus. After a retailer ceases activities that had caused it to be a "retailer engaged in business" in this state pursuant to Revenue and Taxation Code section 6203, the lingering effects of the retailer's physical presence in this state may continue to generate sales for the retailer for a reasonable period thereafter. So long as the retailer continues to generate sales from the lingering effects of its physical presence in California, the retailer is considered to be engaged in business in this state. This concept is generally referred to as "trailing nexus." The concept of trailing nexus was implicitly endorsed by the Board when it found that an online bookseller had nexus with California as long as coupons distributed by its in-state representative could be redeemed at its website. (See In the Matter of Barnes &, State Board of Equalization Memorandum Opinion, September 12, 2002, at p. 5.) The trailing nexus period generally consists of the quarter in which the retailer ceases the activities that had caused it to be a "retailer engaged in business" in California, as well as the entire quarter that follows. Depending on the facts and circumstances specific to each retailer, the period of trailing nexus may be shorter or longer than the general "quarter-plus-a-quarter" approach. 5/1/09. (2010-1).