Sales tax

If you have a physical presence in California (an office, staff, inventory in a warehouse) the obligation generally starts immediately. If you are out of state, the economic nexus threshold is $500,000 in sales of tangible personal property delivered into California, measured against the current or prior calendar year. It is a sales-only test; the 200-transaction test that many states use was eliminated in California in 2019. Sales made through a marketplace count toward the threshold. See our nexus page.

Almost certainly less than you fear, provided you come forward rather than waiting to be found. California operates a voluntary disclosure programme that can limit the lookback period and abate penalties. That option generally disappears once the CDTFA contacts you first, which is the main reason not to wait.

Do not send records or answer detailed questions before speaking to someone who handles these. California requires a Power of Attorney on file before anyone can represent you, so that is the first practical step. What you provide, and how it is organised, shapes the audit: see CDTFA audit representation.

It depends on delivery. Software delivered electronically with no tangible medium is generally not subject to California sales tax; software delivered on physical media generally is. Custom programming is treated differently again, and bundled hardware-and-software arrangements need care. This is a genuinely technical area and the answer turns on the specifics of your contracts. It is worth getting right, it is a common audit finding.

California's statewide base rate is topped up by district taxes voted in at city and county level, which is how combined rates reach 10.75% in some places. The difficulty is allocation, which district applies depends on where the sale is consummated or where the goods are delivered, and getting it wrong misallocates tax even when the total collected is correct. See our district tax page.

Book a scoping call using the form on this page, or call us. We will ask what you need, who is asking you for it, and what condition your records are in, then tell you what the engagement involves and what it will cost before anything begins.