Tax & Accounting Blog

California Clarifies New Nexus Requirements

Indirect Tax, Sales and Use Tax, Sales Tax Nexus July 6, 2011

Signed by Governor Brown on June 28th L. 2001, AB28 (1st Extra. Sess.) expands California’s use tax registration requirements to large out-of-state retailers that were previously not required to collect use tax on sales through mail order, telephone orders, or the Internet to California customers.


This legislation, which was effective upon signature, provides that:

  • A “retailer engaged in business in this state” includes any retailer that is a member of a commonly-controlled group and is a member of a combined reporting group that includes another member of the retailer’s commonly controlled group that, pursuant to an agreement with or in cooperation with the retailer, performs services in California in connection with tangible personal property to be sold by the retailer (such as design and development of tangible personal property sold by the retailer, or the solicitation of sales of tangible personal property on behalf of the retailer).
  • “Retailer engaged in business in this state” also includes any retailer entering into an agreement under which a person in California, for a commission or other consideration, refers potential purchasers of tangible personal property to the retailer, whether by an Internet-based link or an Internet website or otherwise, provided both of these conditions are met: (1) the retailer’s total sales of tangible personal property to California consumers that are referred pursuant to such agreements with persons in California in the past 12 months exceeds $10,000; and (2) the retailer’s total sales of tangible personal property to California consumers in the past 12 months exceeds $500,000.

Businesses meeting the requirements outlined above that are not already registered with the State Board of Equalization are required to fill out an application for a California Certificate of Registration—Use Tax. (see California SBE Special Tax Notice L-284, 07/01/2011.)  If you aren’t sure if you qualify never fear the BOE already has a plan to help.  If the State feels you may be a potential taxpayer you will be receiving a letter along with a questionnaire to help you determine whether you need to register to collect and pay California use tax on your in-state sales.

The State Board of Equalization (SBE) has recently issued two documents regarding use tax obligations of out-of-state sellers:

  • A special notice clarifying the obligations of out-of-state retailers to register and collect use tax on sales made to California residents. (California SBE News Release NR 81-11-G, 07/01/2011.)
  • An update of Publication 77, “Out-of-State Sellers: Do You Need to Register with California?” Beware however, the new version does not reflect the changes related to AB28.
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