New Law Requires Out-of-State Retailers to Collect Use Tax

Sacramento – Beginning September 15, 2012, a new law takes effect (Stats. 2011, ch. 313 (AB 155) that expands the types of out-of-state retailers required to register with the California State Board of Equalization (BOE) and requires them to begin collecting and remitting use tax on sales of tangible personal property to California consumers. The law applies to out-of-state retailers that have substantial nexus with California consumers. This includes any out-of-state retailer that has 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 new law may require some out-of-state online retailers to start collecting tax, but others will remain completely unaffected,” said Board of Equalization Member George Runner. “The good news is that rather than engage in a costly, drawn-out legal fight, has decided to voluntarily invest in California and bring thousands of jobs to our state. I applaud their decision and hope other out-of-state companies will consider doing the same.”

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 BOE’s secure and innovative electronic registration system (eReg) and remit the tax collected by e-filing their returns.

AB 155 does not create a new tax — the California Use Tax has been on the books since 1935. It expands the types of out-of-state retailers required to collect the tax. When AB 155 takes effect 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 a tax on their bill.

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 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 does not have a precise estimate because AB 155 is a new law.

For more information on California’s new use tax registration and collection requirements, visit:

· Sales and Use Tax Regulation 1684 – Collection of Use Tax by Retailers

· New Use Tax Collection Requirements for Out-of-State Retailers Operative September 15, 2012 – Frequently Asked Questions

Retailers with questions please contact the BOE Out-of-State Office at 916-227-6600.