Sales Tax Requirements for Retailers Outside of California
An out-of-state retailer “engaged in business in this state” (California) is required to register, collect use tax on taxable sales made to consumers in California, and remit this tax to the California Department of Tax and Fee Administration.
Revenue and Taxation Code section 6203 provides that “retailer engaged in business in this state” specifically includes, but is not limited to, any of the following:
Any retailer maintaining, occupying, or using, permanently or temporarily, directly or indirectly, or through a subsidiary, or agent, by whatever name called, an office, place of distribution, sales or sample floor or place, warehouse or storage place, or other place of business.
Any retailer having any representative, agent, salesperson, canvasser, independent contractor, or solicitor operating in this state under the authority of the retailer or its subsidiary for the purpose of selling, delivering, installing, assembling, or the taking of orders for any tangible personal property.
As respects a lease, any retailer deriving rentals from a lease of tangible personal property situated in this state.
Clearly, maintaining an office space or having an agent in California can lead to tax liability to the California Department of Tax and Fee Administration for an out-of-state retailer.
Section 6203 does not stop here, and mandates the following: “Any retailer entering into an agreement or agreements under which a person or persons in this state, for a commission or other consideration, directly or indirectly refer potential purchasers of tangible personal property to the retailer, whether by an internet-based link or an internet website, or otherwise, provided that certain conditions are met.”
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Consequently, if an out-of-state retailer, including an online retailer/store, has an agreement with a California agent/contractor/marketer/advertising agent/affiliate or anyone else who refers clients to retailer’s website, then the out-of-state retailer also must register with the CDTFA and collect use tax on taxable sales made to consumers in California.
Section 6203 also imposes such liability to the California Department of Tax and Fee Administration in cases when:
the out-of-state retailer is simply a part of a larger corporate or holding group and;
where another member of that group is located in California and in agreement with retailer performing services in California to design and develop tangible personal property sold by retailer and;
makes solicitation of sales of tangible personal property on behalf of retailer or;
provides other services regarding tangible personal property to be sold by retailer.
Form CDTFA–1164 is usually used by the auditor in the proper registration of out-of-state vendors who are engaged in business in California. A separate Form CDTFA–1164 is prepared for each vendor.
IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, I must inform you that any U.S. federal tax advice contained in this website is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter contained in this website.