5 QUESTIONS ABOUT THE NEW CALIFORNIA DISTRICT USE TAX ANSWERED
Here is what you need to know!
Many retailers must collect and pay district use tax to the CDTFA starting April 1, 2019. This is an important change to tax obligations under California law resulting from a recent U.S. Supreme Court decision. Given these recent changes we wanted to answer the top 5 questions about the new California district use tax in this post.
1. WHAT ARE DISTRICT TAXES?
District taxes are the voter-approved sales and use taxes imposed by cities, counties and other local jurisdictions (districts) added to California’s base sales and use tax rate of 7.25 percent to fund important local services.
Currently, retailers located in a taxing district are engaged in business in that district. A retailer is also engaged in business in a district where they have some form of physical presence under existing law.
2. WHAT IS THE CDTFA?
The CDTFA is the California agency responsible for collecting sale and use tax (as well as other taxes) from businesses.
Basically, CDTFA is one of the agencies that collects taxes in California. CDTFA stands for California Department of Tax and Fee Administration, and it was established last year after the Board of Equalization was restructured.
3. WHO DO THE NEW REQUIREMENTS APPLY TO?
The new rules apply to all retailers:
(1) Who made sales in a California district exceeding $100,000, OR
(2) Made sales into the district in 200 or more transactions during either the preceding year or the current calendar year.
This requirement applies to both in-state and out-of-state retailers.
4. WHAT ARE THESE NEW TAX OBLIGATIONS?
There are essentially 2 new requirements to be aware of:
(1.) New Requirement for Certain Out-of-State Retailers
This is a new requirement if you are an out-of-state retailer, now you will need to register with CDTFA and collect this use tax for sales on or after April 1, 2019. Retailers who were already required to collect California use tax will see no change in their obligations.
(2.) New Requirement for Certain In-State and Out-of-State Retailers
Some retailers will also now be responsible for collecting a local district use tax if their sales in the district exceed $100,000 or who make sales into a district in 200 or more transactions in the preceding or current calendar year. This requirement will apply equally to in-state and out-of-state retailers, including businesses that make their sales online.
5. WHAT DO YOU NEED TO DO?
Check your sales and use tax obligations here: https://gis.cdtfa.ca.gov/public/maps/taxrates/.
The first thing retailers are required to do is register with the CDTFA. Create an account at https://www.cdtfa.ca.gov/services/#Register-Renewals.
Then starting April 1, 2019, you must begin collecting the applicable California use tax from customers and paying the tax to the CDTFA. You will file a return annually with the CDTFA as well.