California enacts $500,000 remote seller nexus threshold

May 29, 2019
May 29, 2019
0 min. read

On April 25, 2019, California Governor Gavin Newsom signed Assembly Bill 147, requiring remote sellers with no physical presence in California to register, collect and remit sales and use tax when the seller exceeds $500,000 in sales, effective April 1, 2019. The legislation replaces prior California Department of Tax and Fee Administration guidance requiring remote sellers to collect the sales tax when $100,000 in sales or 200 transactions were exceeded.

Remote seller nexus

The bill requires that every retailer engaged in business in the state and making sales of tangible personal property for storage, use, or other consumption collect sales and use tax from their customers. Specifically, the bill amends the definition of “retailer engaged in business in this state” to include any retailer that, in the preceding calendar year or the current calendar year, has total combined sales of tangible personal property for delivery in the state by the retailer and all persons related to the retailer that exceed $500,000. 

District Use Tax Collection

The bill also provides that retailers will collect the district tax at the location of their purchaser when the sales threshold is exceeded on a state basis, not a district-by-district basis. Prior department guidance only required the district tax to be collected once the threshold was exceeded in that district.

District taxes are locally imposed sales and use taxes in addition to the 7.25 percent state sales and use tax rate. The bill broadens the state’s definition of “engaged in business” for purpose of district tax collection. All retailers (whether in-state or out-of-state and regardless of physical presence) with California sales exceeding $500,000 in the current or preceding calendar year, are deemed to be engaged in business in every district and required to collect the district use tax in the location of where tangible personal property is delivered. In-state retailers with less than $500,000 in sales of tangible personal property during the preceding or current calendar year are not required to collect district use tax in every district. However, these retailers are still engaged in business in districts where they have physical presence.

Marketplace facilitator nexus

California adopts marketplace facilitator provisions effective Oct. 1, 2019. “Marketplaces” are broadly defined to include a physical or electronic place, including, but not limited to, a store, booth, internet website, catalog, television or radio broadcast, or a dedicated sales software application, where a marketplace seller sells or offers for sale tangible personal property for delivery in this state regardless of whether the tangible personal property, marketplace seller, or marketplace has a physical presence in California. Newspapers, internet websites, and other entities that advertise tangible personal property for sale, but that do not transmit or otherwise communicate the offer and acceptance for the sale of tangible personal property between the seller and purchaser, and do not process payments directly or indirectly through third parties for the tangible personal property sold, are not considered marketplace facilitating.

Determining the threshold

For purposes of determining whether the total combined sales of tangible personal property for delivery in the state exceeds $500,000, a marketplace facilitator includes all sales of tangible personal property for delivery in the state, including their own sales, sales by all related persons and sales facilitated on behalf of marketplace sellers. Marketplace sellers must also include all sales of tangible personal property for delivery in the state, including sales made on their own behalf and sales facilitated through any marketplace facilitator’s marketplace.


Assembly Bill 147 alleviates some compliance burdens on remote sellers by raising the sales threshold, eliminating the transaction threshold and simplifying district tax collection.

California is one of several states modifying their previous economic sales tax nexus thresholds to specifically remove the transaction threshold. Colorado, Iowa, North Dakota, and Washington State have removed the transaction component this year. Other states including Idaho and New Mexico, chose to originally adopt remote seller nexus provisions without a transaction threshold.

Marketplace provider nexus has become a powerful new tool to capture remote seller activity, with over half of the states enacting the provisions this legislative season and over two-dozen states introducing legislation to that effect. Taxpayers with questions about how these provisions may impact their business should speak to their tax advisers.