What Creates Nexus in California

California’s nexus rules, like most states, involve both physical presence and economic activity within the state. Here’s a breakdown with additional details.

Establishing Physical Presence Having any of the following creates a physical presence in California: - Physical Location: Owning or leasing an office, warehouse, store, or any other physical location. - Employees or Salespeople: Having employees or salespeople physically present in California to solicit sales, even if they work remotely part-time. - Inventory Storage: Storing inventory within California, even if it’s through a third-party fulfillment center. - Agents or Representatives: Having any agent or representative operating under your authority to sell, deliver, or install tangible personal property. This could include independent contractors or distributors.

Sales Threshold This is the key factor for out-of-state businesses. If your business makes more than $500,000 in sales of tangible personal property for delivery in California during the current or prior calendar year, you have economic nexus. This applies to all sales channels, including online, mail order, telephone, or any other means.

Important Note: Unlike some states, California’s economic nexus is based solely on sales amount, not a combination of sales and number of transactions.

Limited Protection This federal law provides some protection for out-of-state businesses that only solicit sales in a state without a physical presence. However, California considers it a limited shield. Even if you solely solicit sales, exceeding the $500,000 sales threshold can still trigger economic nexus and sales tax collection requirements.

California Franchise Tax Board (FTB) The FTB is the primary resource for California tax laws and provides information on nexus rules.

Retroactive Liability California may have a look-back period for uncollected sales tax if you exceeded the threshold in previous years.

Sales Tax Registration Once you have nexus in California, you need to register for a sales tax permit and start collecting and remitting sales tax.

Tax Professional Consultation If your business operates in California or has the potential to exceed the sales threshold, we can help you avoid unnecessary problems. Call us at 720.878.2280

Click-Through Nexus While California doesn’t currently have a formal click-through nexus law, the situation is evolving. If you have an affiliate in California that directs customers to your website and facilitates sales (like an influencer marketing campaign) you should let us help you make sense of the implications for your business.

Affiliate Nexus Although we haven’t covered affiliate nexus in detail, it’s another factor to consider. If your business has an affiliate with a physical presence in California, you may also have nexus, even without exceeding the sales threshold.

Remember, nexus rules can be complex and subject to change.Call Now For A Free Consultation – 720.878.2280

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