Sales Tax Fundamentals
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California State Sales Tax 2020: What You Need to Know
byNovember 1, 2020
California is the most populous state in the nation, and that means that most eCommerce businesses have to deal with California sales tax – especially now that California has set their economic threshold. This blog post will go over what you need to know about California sales tax for 2020.
The Basics of California State Sales Tax
California sales tax rate: The statewide California sales tax rate is 7.25%. This rate is made up of 6.00% state sales tax rate and an additional 1.25% local rate. You can read a breakdown of California’s statewide tax rate here.
California local sales tax rates: These vary by district. Find the most up-to-date California sales tax rates here.
How to collect sales tax in California: California is a modified-origin state, which makes figuring out just how much you are supposed to collect in sales tax a little confusing. Long story short, California requires that you collect from buyers the California state sales tax rate of 7.25% plus a district rate. You can find out a whole lot more about collecting sales tax in California here.
Got Nexus in California?
If you are an online seller and have sales tax nexus in a state, then you are required to collect sales tax from buyers in that state. Here’s what creates nexus in California (via the California tax code).
Economic nexus: California passed their “economic nexus” law last year. Starting April 26, 2019, online businesses who make more than $500,000 in gross revenue in the state in the previous or current calendar year are required to collect sales tax when selling to California buyers, regardless of where they are located. Read more about California’s economic nexus law here.
Marketplace facilitator sales tax: Starting Oct 1, 2019, marketplaces are required to collect California sales tax on behalf of third party sellers. This means that sellers who sell via marketplace are no longer considered the seller of record and are no longer required to collect California sales tax. However, be cautious before cancelling your California sales tax permit. You can read what eCommerce businesses need to know about California sales tax here.
If you have nexus in California, ensure that you are signed up to collect sales tax. Click here for how to register for a California sales tax permit.
What’s New in California Sales Tax for 2020?
COVID-19 has dramatically changed the landscape of 2020, and California sales tax is no exception.
The CDTFA cancelled most of their in-person seminars and classes, and temporarily closed public counters in their field offices during the pandemic.
The state also offered sales tax relief to small businesses due to the financial hardships that COVID has caused.
Businesses now have until July 31, 2020 to file their first quarter California sales tax returns. Of course, we are still in the pandemic so this deadline might change. Keep an eye on TaxJar’s COVID-19 sales tax coverage for updates.
More California Sales Tax Resources
California Sales Tax Guide for Business
California Department of Tax and Fee Administration
Looking for more information on how to navigate sales tax in California?
Download our free Guide to Sales Tax Returns in California.
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