California adopted AB-47 implementing an economic nexus threshold and marketplace facilitator policies that treats marketplaces the same. Among the changes:
- Sets California’s economic nexus threshold for sales and use tax at $500,000
- Defines marketplace facilitators as retailers and sellers
A retailer and seller (seller) engaged in business in California is now broadly defined to include any retailer that has total sales of tangible personal property delivered in California exceeding $500,000. The threshold became effective April 1, 2019.
This law overrides a previous notice (Special Notice L-565) that set a lower economic nexus threshold at $100,000 of sales or 200 or more separate transactions into California in the preceding or current calendar year.
Marketplace Facilitator Act
Beginning October 1, 2019, marketplace facilitators will be any seller in a sales transaction they facilitate for a marketplace seller. Sellers must pay sales tax or collect and remit use tax on all sales into California, including those sales made on behalf of its marketplace sellers, if the marketplace facilitator’s aggregate sales into California exceed the economic nexus threshold of $500,000. Retailers meeting the $500,000 state threshold must collect the district tax based on the destination tax rate.
The California marketplace definition includes brick and mortar as well as remote locations where a marketplace seller offers for sale tangible personal property. Facilitators include those that list a marketplace seller’s items for sale on their platforms and those that set prices, take orders, or offer payment processing, fulfillment or storage services. Delivery services distributing local products and certain entities advertising personal property for sale may be exempt. See AB-47 for more details.
Contact your TaxOps adviser with questions on how these state tax policies impact your business.