California State Sales Tax; FAQ’s and Nexus

As a business in California, stay informed about state and local sales tax rules, rates and regulations. Start with our California state sales tax nexus guide. 

As a California business, you are required to collect California State sales tax if you have physical or economic nexus. Therefore, it is pertinent you stay on top of sales tax rates, rules and regulations. 

 Here are some answers to your frequently asked questions:

What Is the California State Sales Tax Rate?

California state sales tax rates can range from 7.25% - 10.25%. The base state sales tax rate is 6%, the mandatory local rate is 1.25%, the local rate range is 0.15% - 3% making the total range from about  7-25%--10.25%. Now, there is a massive degree of varying local sales tax rates. Therefore, you should always use a specific lookup calculator or tool for the most accurate rates. Refer to The California Department of Tax & Fee Administration for a comprehensive list for your specific jurisdiction.

Do I Have Physical Nexus in California?

Your business has physical nexus if you have the following (non-comprehensive):

• A physical location in the state - office, warehouse, sale or sample room, place of distribution, or other place of business, and more. 
• A person working for you operating in the state - representative, agent, salesperson, independent contractor, anyone delivering, installing, assembling or taking orders of TPP (tangible personal property), and more. 
• An affiliate - “click through” nexus. Which is “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 Web site, or otherwise.”
• Trade show presence: If you make sales at a tradeshow this may constitute an establishment of nexus. 

These are the main elements that apply to most sellers but physical nexus may be established in California through other ways too. Refer to the California Sales and Use Tax Law website for comprehensive information. 

Do I Have Economic Nexus in California?

California considers retailers who exceed $500,000 in taxable annual sales to have economic nexus. This includes combined sales of tangible personal property delivered to the state by the retailer and all people working on behalf of the retailer. You can read up on the California economic nexus guide for sellers.

Is What I’m Selling Taxable?

If you have discovered you have established nexus in California, your next step is to understand the taxability of your goods or services. If the services you provide include creating or manufacturing a physical item, you may need to pay sales tax on your products. Other than that, most services in California are generally not taxable. Tangible products are taxable in California, with some exceptions. Exceptions may include prescription medicine, medical devices, and certain groceries. A full list of exemptions can be found here. 

More Questions?

Staying informed about your state and local sales tax rules will help your business ensure you charge customers the right amount, which will make it easier to stay compliant and keep ahead. If you find you have more sales tax questions or concerns, feel free to reach out to us for a free consultative call. There is confidence in collaboration; we would love to collaborate with you.