The State Board of Equalization (SBE) has amended Publication 109 on “Internet Sales,” clarifying the tax treatment of sales made over the Internet by both in-state and out-of-state businesses.
Businesses physically located in California
If your business is located in California, your Internet sales of physical products are generally taxable unless they qualify for a specific tax exemption or exclusion (view Publication 109). For sales tax purposes, Internet sales are treated just like sales you make at retail stores or other outlets, through sales representatives, over the telephone, or by mail order. To obtain a seller’s permit complete and file a BOE-400-SPA, California Seller’s Permit Application for Individuals/Partnerships/ Corporations/Organizations (Regular or Temporary), with the Board of Equalization (BOE).
Businesses located outside of California
If your business is located outside of California, your sales of physical products delivered to California locations are generally subject to the state’s use tax. While your customers are responsible for the use tax, you must collect it from them and pay it to us if you:
• Have a permanent or temporary business location in California, including a warehouse, sales room, or office; or you
• Have any kind of representative or agent in the state, even temporarily, who makes sales, takes orders, installs or assembles merchandise, or makes deliveries for you.
If either of the conditions above applies to your operations, you are required to register with the BOE and obtain a Certificate of Registration—Use Tax Account. Please complete and file a BOE-400-CSC, Certificate of Registration -Use Tax Application, with the BOE. If you do not register and collect the use tax, your customers must pay the tax directly to us (see “Voluntary collection in Publication 109).
Special case—leases: Even if the criteria above do not apply to your business, generally, you must register, collect, and pay use tax on payments you receive from the lease of merchandise including vehicles, vessels and aircraft, located in California. This is true whether you negotiate the lease over the Internet or by any other means.
The use tax rate is the same as the sales tax rate for any given California location; please see publication 71, California City and County Sales and Use Tax Rates. Transactions that are exempt from sales tax are usually exempt from use tax. View More Information.
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