In a much-anticipated move, the California Department of Tax and Fee Administration announced last week that out-of-state retailers who sell above certain thresholds will have to start collecting California use taxes on their sales into the state, starting April 1, 2019.

Since the landmark Supreme Court decision in South Dakota v. Wayfair last finding that out-of-state retailers can be required to collect sales tax, states have been scrambling to come up with new sales tax regimes. California is one of the first big states to announce its policy; other large states like Texas, New York and Florida have yet to weigh in.

“Obviously, having the largest state make an announcement is a significant development,” explained Scott Peterson, vice president of U.S. tax policy and government relations at tax compliance solution developer Avalara. “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.”

Starting April 1, California will require out-of-state retailers to collect if, during the previous or current calendar year:

• Their sales for delivery into California exceed $100,000; or,
• The retailer makes sales for delivery into California in 200 or more separate transactions.

That those thresholds match those set by South Dakota is no coincidence, according to Avalara’s Peterson: “The Supreme Court’s Wayfair decision didn’t provide a lot of guidance for states. Like most states, California is taking the safe position and adopting the same thresholds as South Dakota.”

For local taxes, the same economic nexus thresholds will apply over the same time periods for each local district.

For more information, visit Avalara’s Wayfair resources page.