California is lightening up on some marketplace sellers by limiting the lookback period that creates sales tax exposure.
The new rule (Special Notice L-681) grants a qualifying out of state retailer (marketplace seller) reduced liability for certain taxes. Qualified retailers must use a marketplace facilitator to facilitate sales for delivery in California and that marketplace facilitator must store their inventory in California. Taxpayers that qualify under these conditions are entitled to “reduced liability for certain taxes, penalties, and interest.”
California recently enacted legislation that prohibits sales and use taxes on sales made by a “qualifying retailer” prior to April 1, 2016, and requires the state to relieve any penalties imposed on a “qualifying retailer” on sales for the period April 1, 2016 to March 31, 2019.
Who is a qualifying retailer?
Effective June 27, 2019, you are a qualifying retailer per Revenue and Taxation Code section 6487.07 if you meet all of the following conditions: You did not register with the CDTFA under the Sales and Use Tax Law prior to December 1, 2018. You did not fle sales or use tax returns, or make sales or use tax payments prior to being contacted by the CDTFA.
- You did not register with the Colorado Department of Tax and Fee Administration (CDTFA) under the Sales and Use Tax Law prior to December 1, 2018.
- You did not file sales or use tax returns, or make sales or use tax payments prior to being contacted by the CDTFA.
- You voluntarily register with the CDTFA, and by September 25, 2019, fle completed tax returns for all tax reporting periods for which a determination may be issued under section 6487.07 (that is, for periods on and after April 1, 2016), and either Pay the tax due in full, or Apply for a payment plan, but only if the final payment under the plan is paid no later than December 31, 2021 (qualifying installment payment agreement).
- You are or were engaged in business in this state solely because you used a marketplace facilitator (as defined in section 60411 ) to facilitate sales for delivery in this state and the marketplace facilitator stored your inventory in this state.
A qualifying retailer will not be assessed tax by the CDTFA with respect to sales made prior to April 1, 2016, and will be relieved of penalties with respect to sales made for the period April 1, 2016 to March 31, 2019. Go to www.cdtfa.ca.gov to register and complete form CDTFA-38-A, Relief for Marketplace Sellers pr section 6487.07. The start date on your account should reflect the date you began engaging in business in California.
Let’s talk tax
Judy Vorndran can be reached at jvorndran@taxops.com.
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