California imposes some of the strictest and most numerous business tax regulations in the country. Among the newest regulations – and the most burdensome – are those surrounding internet sales tax compliance, which impact California and out-of-state companies alike.
At the Tax Law Office of David W. Klasing, our award-winning Orange County CPAs and Sales Tax Attorneys have extensive experience helping foreign and domestic companies navigate the complex web of California sales tax laws, which were recently overhauled by a major U.S. Supreme Court ruling affording states more power to enforce compliance among online sellers. We understand the practical considerations that impact your business and will work closely with you to develop a tax strategy that puts you in compliance with the laws, making it easier to avoid or mitigate penalties that could harm your bottom line. With tax offices conveniently located in Irvine, and across California we are here to support entities throughout the Orange County region and beyond.
Are Internet Sales Taxed in California?
There is currently no federal sales tax. Instead, each state imposes its own set of regulations, which can produce chaos and confusion – especially among internet merchants who sell products in multiple states. It is also important for taxpayers to understand that these laws apply to more than just the “major players” like Amazon, eBay, and Walmart.com: even small retailers, such as individuals who sell homemade goods on sites like Etsy, can be impacted.
In fact, online sellers are now more strictly regulated than ever before, due to a Supreme Court ruling in a case (South Dakota v. Wayfair) that was decided in 2018. In Wayfair, the U.S. Supreme Court decided 5-4 in favor of several new tax rules for companies that sell products online. These new rules effectively override older legal precedents, such as Quill Corporation v. North Dakota (1992). This has had the effect of granting individual states, including California, increased power to hold online retailers to the same standards as brick-and-mortar businesses in terms of calculating, collecting, and paying sales tax.
While the rules are still relatively new, online merchants are now more closely monitored to ensure that they are complying, with an increase in the frequency of sales tax audits. Make sure your business is prepared after the Wayfair ruling by working with an experienced tax attorney or CPA who understands how sales tax must be calculated and collected to satisfy California’s new requirements.
Sales Tax Requirements for Transactions Online
As stated above, different sales tax rules apply in different states. Some of the rules specific to California are discussed below.
Does California Have Sales Tax Nexus?
“Nexus” is a legal term that describes a situation where a business entity has a relationship with a state (such as California) that triggers sales tax requirements in that state. For instance, if you operate a small business that sells products online to buyers in Irvine (or another city within Orange County), your company may have “sales tax nexus” with the state of California. The term “nexus” is sometimes described as “sufficient physical presence” or “economic connection.”
Orange County Sales Tax Rates
It is important for online merchants to keep in mind that sales tax rates differ based on geography, not just across state lines, but further, between individual cities or counties. Additionally, sales tax rates can fluctuate from year to year, which means business owners must regularly review their sales tax obligations to ensure they are familiar with the latest regulations. California sales tax and use rates, which are posted online by the California Department of Tax and Fee Administration (CDTFA), are as follows in Orange County as of October 1, 2018:
- Orange County cities with a sales tax rate of 750% include the following:
- Aliso Viejo, Anaheim, Atwood, Balboa, Balboa Island, Bolsa, Brea, Brookhurst Center, Buena Park, Capistrano Beach, Corona Del Mar, Costa Mesa, Coto De Caza, Cowan Heights, Cypress, Dana Point, East Irvine, El Modena, El Toro, Foothill Ranch, Fullerton, Garden Grove, Huntington, Huntington Beach, Irvine, Ladera Ranch, Laguna Beach, Laguna Hills, Laguna Niguel, Laguna Woods, Lake Forest, Los Alamitos, Mariner, Midway City, Mission Viejo, Monarch Beach, Newport Beach, Orange, Placentia, Rancho Santa Margarita, Rossmoor, San Clemente, San Juan Capistrano, Santa Ana, Seal Beach, Silverado Canyon, Sunset Beach, Trabuco Canyon, Tustin, Villa Park, Yorba Linda
- Orange County cities with a sales tax rate of 250% include the following:
- La Habra
- Orange County cities with a sales tax rate of 750% include the following:
- Fountain Valley, La Palma, Stanton, Westminster
Orange County Online Sales Tax Lawyer and CPA for Internet Retailers
Failure to comply with internet sales tax laws can subject your business to costly fines and penalties, for which you could potentially be held personally liable. Make sure your business has a trusted and reliable partner to deliver dependable tax guidance in all online sales tax matters. From internet sales tax audit representation to small business tax planning and bookkeeping services, the Orange County tax lawyers at the Tax Law Office of David W. Klasing possess the experience to answer your business tax questions and help you achieve your goals.
Contact us online today to book a reduced-rate tax consultation or call our Orange County office in Irvine at (949) 681-3502. Alternately, you can reach our main office by calling (800) 681-1295.
Note: If you have concerns about the privacy of our initial or subsequent communication and are unable to easily travel to our Irvine / Orange County Main Office, consider scheduling a GoToMeeting to safely and securely establish an initial or maintain an existing attorney client relationship. With end-to-end encryption, strong passwords and top-rated reliability, no one is messing with your meeting. To schedule a reduced rate initial consultation via GoToMeeting follow this link. Call our office and request a GoToMeeting if you are an existing client. We are generally happy to travel to any of our appointment only satellite offices for a subsequent meeting in appropriate circumstances once a relationship is established via a signed engagement letter and the payment of an initial retainer or where enough retainer is available where a current client to cover the reasonable travel time and time required for the meeting.
Will it cost me more to hire the Tax Law Offices of David W. Klasing, who’s main office and the vast majority of the firm’s staff is located in Irvine California, but an appointment only Satellite office is close to my location, as opposed to a local company? Absolutely not! See our policies that address this issue here:
Sales Tax Questions and Answers
- Common issues encountered during sales tax audit
- What is a sales tax audit?
- Disagreeing with business audit conclusions
- Timeline to file Petition for Redetermination?
- What should Petition for Redetermination contain?
- Is the appeals conference formal or informal?
- Appeals Division’s Decision and Recommendation
- Are a mark-up percentage and a profit margin the same?
- Problems with the mark up audit
- Can State Board of Equalization ignore my business records
- What is a sales tax deficiency determination?
- Business being audited for sales tax. Should I be worried?
- Audit determined fraud to avoid sales and use tax
- Definition of “sale” for California Sales Tax
- What do California sellers need to know about sales tax?
- How do I apply for a sellers permit?
- What are my obligations as a permit holder?
- What is sales tax?
- What is tangible personal property?
- What is a sale?
- What are total gross receipts?
- What is use tax?
- Who is responsible for paying the use tax?
- Who is a retailer engaged in business in California?
- Who is a qualified purchaser?
- Do I need a Certificate of Registration Use tax?
- Do I need a Use Tax Direct Payment Permit?
- What types of sales are exempt from sales tax?
- How are Internet Transactions Taxed?
- How is California sales or use tax determined?
- What is the statewide sales and use tax rate?
- Are there other local and district sales and use taxes?
- Total sales and use tax rate calculation
- How to protect against successor liability in California
- Recourse when issued California sales tax liability notice
- CA Sales Tax liability extend to purchasers/successors?
- Waiting Until Audited to Take Action on Tax Matters
- Sales tax records needed in California
- What are California’s sales and use taxes?
- Why does the State of California audit businesses to ensure compliance with sales and use taxes? How does the State determine whether to audit my business?
- The BOE reviews the purchase invoices of my business