On April 25, 2019, acting on the authority of South Dakota v. Wayfair, 585 U.S. ___ (2018), California Governor Gavin Newsom signed into law Assembly Bill (AB) No. 147.  The legislation requires remote sellers (sellers located outside of California) to register with the California Department of Tax and Fee Administration (CDTFA) and collect California use tax if, during the preceding or current calendar year, total combined sales of tangible personal property for delivery in California exceed $500,000.  In calculating total combined sales, a retailer must include its sales into California and the sales of all persons related to the retailer into California. 

The new collection requirement imposed by AB 147 is operative April 1, 2019 and will not be applied retroactively.  AB 147 supersedes the direction provided in Special Notice L-565, which previously provided that, beginning April 1, 2019, a retailer located outside of California is required to collect use tax if, during the preceding or current calendar year, the retailer's sales into California exceed $100,000, or the retailer made sales into California in two hundred (200) or more separate transactions.

Retailers that exceed the $500,000 sales threshold are required to register with the CDTFA to collect the California use tax even if they were not previously required to register.  These retailers include retailers that sell tangible goods for delivery into California through the Internet, mail-order catalogs, telephone, or any other means.  In sum, the legislation allows the state to "impose a use tax collection duty on retailers who have specified levels of economic activity in the state, even though they do not have physical presence in [the] state."  AB 147, sec. 1(f). 

Previously published in ABA Business Law Today, April 30, 2019.

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