The New Nexus for California
- Sales and Use Tax
- July 14, 2011 | Susan McLain
In California, the state legislature has now defined nexus to be:
CA further defines nexus to ensure collection of sales tax
Any retailer that is a member of a commonly-controlled group and is a member of a combined reporting group that includes another member of the retailer’s commonly controlled group that…
Need to take a breath yet?
According to San Francisco Chronicle writer, Kathleen Pender, sales tax laws in California state that “if a retailer has a nexus or connection with the state, it is required to pay the sales tax. It may collect the sales tax from the customer but even if it doesn’t, it is still responsible for paying it.”
For Californians and businesses, the “new nexus” means any company “…that has some ownership in common with a company in California that designs its website or builds its products, but it would not include a retailer that hires an unrelated company in California to do these jobs.” Subsidiaries owned by Amazon such as the one that designed Kindle, would qualify Amazon as having nexus. Amazon pro-actively severed relationships with their affiliate program associates in anticipation of this law, but it appears that its nexus is defined by more than associate relationships and it will still be required to collect and remit the sales taxes on purchases made by Californians and shipped to the state.
An expanded definition of the new nexus is supported by a state appeals court decision that “…held that an out-of-state retailer that lets customers return products purchased online to an affiliated brick-and-mortar store in California has nexus.”
In addition to these clarifications, the Board of Equalization of California indicates that any “…retailers that have a subsidiary or sister company that performs services in California in connection with products sold by the retailer, including but not limited to, design and development of tangible personal property sold by the retailer, or the solicitation of sales of tangible personal property on behalf of the retailer” qualifies it for nexus.
I’m afraid trying to reword that definition would also get a bit wordy. In the end, one of the “tragedies” according to Jonathan Johnson, president of Overstock’s parent company, O.Co., “is that it puts a burden on small businesses to become tax collectors and know the rules of all the different taxing jurisdictions within the state of California – every county, city, hamlet and burg has a different taxing jurisdiction.”
But sales tax collection, remittance and filing doesn’t have to be a burden. Software-as-a-Service such as AvaTax, by Avalara, have brought fast, easy and affordable solutions to small- and medium-size businesses that are scalable to their needs. Learn more about AvaTax at www.avalara.com.