California’s State Board of Equalization is warning that beginning Sept. 15, a new law will take effect expanding the types of out-of-state retailers who are required to register with the board and requires them to begin collecting and remitting use tax on sales of tangible personal property to California consumers.
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The law applies to out-of-state retailers that have substantial nexus with California consumers, including any out-of-state retailer, such as online Web sites, that have sold more than $1 million to California consumers in the past year and has had more than $10,000 in sales referred by an affiliate operating in California.
“This law is a giant step forward,” said BOE chairman Jerome E. Horton in a statement. “It will help California collect much needed revenue to support critical public services. Also, by requiring more out-of-state retailers to collect use tax, the law will help level the playing field for all who do business here. California and its businesses will not be held hostage to unfair business practices.”
The BOE is sending letters to more than 200 out-of-state retailers notifying them about the new law. Retailers will be able to easily register online with the board’s secure electronic registration system, known as eReg, and remit the tax collected by e-filing their returns.
AB 155 does not create a new tax, the BOE noted. The California Use Tax has been on the books since 1935. It expands the types of out-of-state retailers required to collect the use tax. When AB 155 takes effect on September 15, some additional out-of-state retailers, including Internet retailers, will collect the use tax at the point of sale, and California consumers will begin to see the tax on their bills.
However, if out-of-state retailers do not collect the tax, California consumers must continue to report and pay their use taxes. Consumers can pay their use taxes directly to the BOE using eReg or pay on their California income tax returns with the option of using the Use Tax Lookup Table.
AB 155 is expected to help the BOE collect tens of millions of dollars in use tax that will help pay for services such as public safety, schools and health care. The BOE said it does not have a precise estimate, however, because AB 155 is a new law.