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Who pays the California internet sales tax?

by Jian Lin
8 replies
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I just finish design my site and soon going to launch my online store. I am living in california and I have read some news about the that ca start to collect the internet sales tax in ca. I am confused. Here is my question. Who is going to need to pay the sales tax? Are the customers who lives inside the california? or all customers who purchase from the the online store with its company office physically located in the california?

Also, if only the customers who lives inside the california needs to pay sales tax. What the tax rate should be since it vary in different cities.

Can anyone with experience please help. Thanks.
#california #internet #pays #sales #tax
  • Profile picture of the author IMPower5
    Recently online retailer Amazon.com has implemented a sales tax on internet purchases in California. This will not have an effect on your website but it may in the future. The fight over internet sales taxes will not be over any time soon. The drive for uniform taxation of retail sales nationwide is led by supporters of brick-and-mortar stores whose shoppers have always paid the levy in those states with sales taxes. This may make the difference between survival and bankruptcy for many smaller store owners in the future.
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    • Profile picture of the author Jian Lin
      Thank you very much, IMPower5 for the reply.

      I decided to give the state board of equalization a call today. Actually the new tax rule already start to effect this month. People who purchase inside the california has to pay 7.25% states tax, the people who lives in my county (Alameda county) will have to pay for the highest tax rate which is 8.75% (which is sucks), and all the other purchase that ship to outside the california will not be charged.
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      • Profile picture of the author ryshark
        Originally Posted by Jian Lin View Post

        Thank you very much, IMPower5 for the reply.

        I decided to give the state board of equalization a call today. Actually the new tax rule already start to effect this month. People who purchase inside the california has to pay 7.25% states tax, the people who lives in my county (Alameda county) will have to pay for the highest tax rate which is 8.75% (which is sucks), and all the other purchase that ship to outside the california will not be charged.
        Is this only for customers who live in California which is the same state as you or for ALL customers you sell to regardless of which state they live? I'm also based out of CA
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  • Profile picture of the author IMPower5
    Hi Jian

    Yes, you should always contact your local tax departments to err on the safe side. Glad you called and will be able to properly tax your customers. Not that charging such a high tax locally is a good thing! But keeps you from paying the price in the end.
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  • Profile picture of the author James Foster
    Simple solution. Form your business entity in Nevada.
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    • Profile picture of the author hondablaster
      Originally Posted by James Foster View Post

      Simple solution. Form your business entity in Nevada.
      Would this be legal, is there a loophole that keeps me from getting nabbed? I think all this B.S. just hurts California residents and businesses. They will just shift to other states and sites that don't charge.
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      • Profile picture of the author Farish
        Lets clear some things up here.

        If your business is in California and you sell to a California Resident, you legally must collect sales tax on physical goods. Digital products (ebooks) and labor/services does not count.

        If you sell to an out of state customer, you do not have to collect sales tax, it is up that person to comply to their state's sales tax law.

        If you start a Nevada corporation and the state of California discovers that you have a base of operations in California, they will demand and come after your company for sales tax revenue for sales in California, and go after the corporation for additional income(not sales) tax revenue on all sales. Forming out of state corporations can have advantages, but for example some of your loopholes will be gone by January due to the passage of Prop 39 in California.

        The Amazon law that was passed last year and implement this year was a partial compromise between Amazon and the state. Amazon wanted to build distributor warehouses out here in California which is why they stop fighting the passing of the law. Do not use this law as a basis as what you must do.

        A unifying sales tax law may pass within a year or two by the Federal government, but until then, these are your options.
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  • Profile picture of the author ryshark
    Thanks for clearing everything up
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