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Business Taxes Law Guide—Revision 2024
Sales And Use Tax Regulations
Title 18. Public Revenues
Division 2. California Department of Tax and Fee Administration — Business Taxes (State Board of Equalization — Business Taxes — See Chapters 6 and 9.9)
Chapter 4. Sales and Use Tax
Article 17. Payment and Collection of Use Tax
- 1683 "Engaged in Business" [Repealed.]
- 1684 Collection of Use Tax by Retailers
- 1684.5 Marketplace Sales
- 1685 Payment of Tax by Purchasers
- 1685.5 Calculation of Estimated Use Tax—Use Tax Table
- 1686 Receipts for Tax Paid to Retailers
- 1687 Information Returns
Regulation 1683. Engaged in Business.
[Repealed May 4, 1982, effective August 19, 1982.]
Regulation 1684. Collection of Use Tax by Retailers.
Reference: Sections 6203, 6204, 6226, and 7051.3, Revenue and Taxation Code.
Section 513(d)(3)(A), Internal Revenue Code (26 USC).
(a) Collection of Use Tax by Retailers Engaged in Business in This State. Retailers engaged in business in this state as defined in section 6203 of the Revenue and Taxation Code and making sales of tangible personal property, the storage, use, or other consumption of which is subject to the use tax must register with the Department and, at the time of making the sales, or, if the storage, use or other consumption of the tangible personal property is not then taxable, at the time it becomes taxable, collect the use tax from the purchaser and give the purchaser a receipt therefor.
(b) Definitions and Rebuttable Presumption.
(1) On and after September 15, 2012, a retailer is engaged in business in this state as defined in section 6203 of the Revenue and Taxation Code if the retailer has a substantial nexus with this state for purposes of the Commerce Clause (art. I, § 8, cl. 3) of the United States Constitution or federal law otherwise permits this state to impose a use tax collection duty on the retailer. Retailers engaged in business in this state include, but are not limited to, retailers described in subdivision (b)(4), on and after April 1, 2019, retailers described in subdivision (c)(1), on and after September 15, 2012, and retailers described in subdivision (c)(2) and (3), from September 15, 2012, through March 31, 2019.
(2) Except as otherwise provided in this regulation, on and after September 15, 2012, there is a presumption that a retailer is engaged in business in this state as defined in section 6203 of the Revenue and Taxation Code if the retailer has any physical presence in California. A retailer may rebut the presumption if the retailer can substantiate that its physical presence is so slight that the United States Constitution prohibits this state from imposing a use tax collection duty on the retailer.
(3) A retailer does not have a physical presence in California solely because the retailer engages in interstate communications with customers in California via common carrier, the United States mail, or interstate telecommunication, including, but not limited to, interstate telephone calls and emails. The rebuttable presumption in subdivision (b)(2) does not apply to a retailer that does not have a physical presence in California.
(4) On and after April 1, 2019, a retailer is engaged in business in this state as defined in section 6203 of the Revenue and Taxation Code if the total combined sales of tangible personal property for delivery in California by the retailer and all persons related to the retailer exceed five hundred thousand dollars ($500,000) in the preceding or current calendar year. For purposes of this subdivision, a person is related to another person if both persons are related to each other pursuant to Internal Revenue Code section 267(b) and the regulations thereunder.
(A) If the total combined sales of tangible personal property for delivery in California by a retailer and all persons related to the retailer exceeded five hundred thousand dollars ($500,000) during calendar year 2018, or the first quarter of calendar year 2019, then the retailer is required to be registered with the Department and is required to begin collecting use tax on April 1, 2019.
Example 1: Retailer A has no physical presence in California, and uses its own website to sell goods at retail. Retailer A’s gross revenue from sales of goods for delivery in California during calendar year 2018 exceeded $500,000. Therefore, on April 1, 2019, retailer A is a retailer engaged in business in this state. Retailer A is required to be registered with the Department on April 1, 2019, and is required to collect use tax on its retail sales to California customers on and after April 1, 2019.
Example 2: Retailer B has no physical presence in California, and uses its own website to sell goods at retail. Retailer B’s gross revenue from sales of goods for delivery in California did not exceed $500,000 during calendar year 2018, but did exceed $500,000 during the period from January 1, 2019 through March 31, 2019. Therefore, on April 1, 2019, Retailer B is a retailer engaged in business in this state. Retailer B is required to be registered with the Department on April 1, 2019, and is required to collect use tax on its retail sales to California customers on and after April 1, 2019.
(B) If the total combined sales of tangible personal property for delivery in California by a retailer and all persons related to the retailer exceeded five hundred thousand dollars ($500,000) during calendar year 2019, but after March 31, 2019, or during any subsequent calendar year, the retailer is required to register with the Department and begin collecting use tax immediately after the sale was made that exceeded the five hundred thousand dollar ($500,000) threshold.
Example: Retailer C has no physical presence in California and uses its own website to sell goods at retail. Retailer C’s gross revenue from sales for delivery in California was less than $500,000 during calendar year 2018 and during the period from January 1 through March 31, 2019. Therefore, on April 1, 2019, Retailer C was not a retailer engaged in business in this state and was not required to be registered with the Department or to collect use tax. However, on August 1, 2019, Retailer C made a retail sale of jewelry for $900 that brought its total sales for delivery into California to $500,400 for calendar year 2019. Therefore, Retailer C is a retailer engaged in business in this state immediately after the sale and is required to register with the Department and begin collecting use tax on its retail sales to California customers made after the $900 sale of jewelry on August 1, 2019.
(c) Nonexhaustive Examples of Retailers Engaged in Business in This State.
(1) On and after September 15, 2012, a retailer is engaged in business in this state as defined in section 6203 of the Revenue and Taxation Code if:
(A) The retailer owns or leases real or tangible personal property, including, but not limited to, a computer server, in California; or
(B) The retailer derives rentals from a lease of tangible personal property situated in California (under such circumstances the retailer is required to collect the tax at the time rentals are paid by the lessee); or
(C) The retailer maintains, occupies, or uses, permanently or temporarily, directly or indirectly, or through a subsidiary, or agent, by whatever name called, an office, place of distribution, sales or sample room or place, warehouse or storage place, or other place of business in California; or
(D) The retailer has a representative, agent, salesperson, canvasser, independent contractor, solicitor, or any other person operating in California on the retailer’s behalf, including a person operating in California under the authority of the retailer or its subsidiary, for the purpose of selling, delivering, installing, assembling, or the taking of orders for any tangible personal property, or otherwise establishing or maintaining a market for the retailer’s products.
(2) From September 15, 2012, through March 31, 2019, a retailer is engaged in business in this state as defined in section 6203 of the Revenue and Taxation Code if:
(A) The retailer is a member of a commonly controlled group, as defined in Revenue and Taxation Code section 25105; and
(B) The retailer is a member of a combined reporting group, as defined in California Code of Regulations, title 18, section 25106.5, subdivision (b)(3), that includes another member of the retailer’s commonly controlled group that, pursuant to an agreement with or in cooperation with the retailer, performs services in California in connection with tangible personal property to be 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. For purposes of this paragraph:
(i) Services are performed in connection with tangible personal property to be sold by a retailer if the services help the retailer establish or maintain a California market for sales of tangible personal property; and
(ii) Services are performed in cooperation with a retailer if the retailer and the member of the retailer’s commonly controlled group performing the services are working or acting together for a common purpose or benefit.
(3) From September 15, 2012, through March 31, 2019, a retailer is engaged in business in this state as defined in section 6203 of the Revenue and Taxation Code if the retailer enters into an agreement or agreements under which a person or persons in this state, for a consideration that is based upon completed sales of tangible personal property, whether referred to as a commission, fee for advertising services, or otherwise, directly or indirectly refer potential purchasers of tangible personal property to the retailer, whether by an Internet-based link or an Internet website, or otherwise, provided that:
(A) The total cumulative sales price of all of the tangible personal property the retailer sold to purchasers in California that were referred to the retailer by a person or persons in California pursuant to an agreement or agreements described above, in the preceding 12 months, is in excess of ten thousand dollars ($10,000); and
(B) The retailer, within the preceding 12 months, has total cumulative sales of tangible personal property to purchasers in California in excess of one million dollars ($1,000,000).
The determination as to whether a retailer has made the requisite amount of sales to purchasers in California during the preceding 12-month period shall be made at the end of each calendar quarter. A retailer is not engaged in business in this state pursuant to this paragraph if the total cumulative sales price of all of the tangible personal property the retailer sold to purchasers in California that were referred to the retailer by a person or persons in California pursuant to an agreement or agreements described above, in the preceding 12 months, is not in excess of ten thousand dollars ($10,000), or if the retailer's total cumulative sales of tangible personal property to purchasers in California were not in excess of one million dollars ($1,000,000) in the preceding 12 months.
For purposes of this paragraph, the term "retailer" includes an entity affiliated with a retailer within the meaning of Internal Revenue Code section 1504, which defines the term "affiliated group" for federal income tax purposes.
(4) Paragraph (3) does not apply to an agreement under which a retailer purchases advertisements from a person in California, to be delivered on television, radio, in print, on the Internet, or by any other medium, unless:
(A) The advertisement revenue paid to the person in California consists of commissions or other consideration that is based upon completed sales of tangible personal property, and
(B) The person entering into the agreement with the retailer also directly or indirectly solicits potential customers in California through the use of flyers, newsletters, telephone calls, electronic mail, blogs, microblogs, social networking sites, or other means of direct or indirect solicitation specifically targeted at potential customers in this state.
(5) For purposes of paragraph (3):
(A) A person that is an individual is in this state when the person is physically present within the boundaries of California; and
(B) A person other than an individual is in this state when there is at least one individual physically present in California on the person’s behalf.
(6) Paragraph (3) does not apply to a retailer’s agreement with any person, unless an individual solicits potential customers under the agreement while the individual is physically present within the boundaries of California, including, but not limited to, an individual who entered into the agreement directly with the retailer, an individual, such as an employee, who is performing activities in California directly for a person that entered into the agreement with the retailer, and any individual who is performing activities in California indirectly for any person who entered into the agreement with the retailer, such as an independent contractor or subcontractor.
(7) Paragraph (3) does not apply if a retailer can demonstrate that all of the persons with whom the retailer has agreements described in paragraph (3) did not directly or indirectly solicit potential customers for the retailer in California. A retailer can demonstrate that an agreement is not an agreement described in paragraph (3) if:
(A) The retailer’s agreement:
(i) Prohibits persons operating under the agreement from engaging in any solicitation activities in California that refer potential customers to the retailer including, but not limited to, distributing flyers, coupons, newsletters and other printed promotional materials or electronic equivalents, verbal soliciting (e.g., in-person referrals), initiating telephone calls, and sending e-mails; and
(ii) If the person in California with whom the retailer has an agreement is an organization, such as a club or a non-profit group, the agreement provides that the organization will maintain on its website information alerting its members to the prohibition against each of the solicitation activities described above;
(B) The person or persons operating under the agreement in California certify annually under penalty of perjury that they have not engaged in any prohibited solicitation activities in California at any time during the previous year, and, if the person in California with whom the retailer has an agreement is an organization, the annual certification shall also include a statement from the organization certifying that its website includes information directed at its members alerting them to the prohibition against the solicitation activities described above; and
(C) The retailer accepts the certification or certifications in good faith and the retailer does not know or have reason to know that the certification or certifications are false or fraudulent.
A retailer is excused from the requirement to obtain a certification if the person from whom the certification is required is dead, lacks the capacity to make such certification, or cannot reasonably be located by the retailer and there is no evidence to indicate that such person did in fact engage in any prohibited solicitation activities in California at any time during the previous year.
(8) For purposes of this subdivision:
(A) "Advertisement" means a written, verbal, pictorial, graphic, etc. announcement of goods or services for sale, employing purchased space or time in print or electronic media, which is given to communicate such information to the general public. Online advertising generated as a result of generic algorithmic functions that is anonymous and passive in nature, such as ads tied to Internet search engines, banner ads, click-through ads, Cost Per Action ads, links to retailers’ websites, and similar online advertising services, are advertisements and not solicitations.
(B) "Individual" means a natural person.
(C) "Person" means and includes any individual, firm, partnership, joint venture, limited liability company, association, social club, fraternal organization, corporation, estate, trust, business trust, receiver, assignee for the benefit of creditors, trustee, trustee in bankruptcy, syndicate, the United States, this state, any county, city and county, municipality, district, or other political subdivision of the state, or any other group or combination acting as a unit.
(D) "Solicit" means to communicate directly or indirectly to a specific person or specific persons in California in a manner that is intended to and calculated to incite the person or persons to purchase tangible personal property from a specific retailer or retailers.
(E) "Solicitation" means a direct or indirect communication to a specific person or specific persons done in a manner that is intended to and calculated to incite the person or persons to purchase tangible personal property from a specific retailer or retailers.
(F) "Solicit," "solicitation," "refer," and "referral" do not mean or include online advertising generated as a result of generic algorithmic functions that is anonymous and passive in nature, such as ads tied to Internet search engines, banner ads, click-through ads, Cost Per Action ads, links to retailers’ websites, and similar online advertising services.
(9) Examples:
(A) Corporation X is physically located in California and maintains a website at www.corporationx.com. Corporation X enters into agreements with one or more hiking gear and accessories retailers under which Corporation X maintains click-through advertisements or links to each retailer’s website on Corporation X’s website at www.corporationx.com and Corporation X’s webpage at www.socialnetwork.com/corporationx in return for commissions based upon the retailers’ completed sales made to customers who click-through the ads or links on Corporation X’s website and webpage. Corporation X also posts reviews at www.corporationx.com of the products sold through the click-through ads and links on its website and webpage. However, Corporation X does not engage in any solicitation activities in California that refer potential customers to the retailer or retailers who have click-through ads or links on its website or webpage. Therefore, paragraph (3) does not apply to the agreements between Corporation X and the retailer or retailers who have ads or links on Corporation X’s website or webpage.
(B) Same as (A) above, except that Corporation X also enters into an agreement under which Advertising Corporation places advertisements for www.corporationx.com on other businesses’ websites and webpages, and mails or emails advertisements for www.corporationx.com to anyone who signs up to receive such advertisements. However, Corporation X does not engage in any solicitation activities in California that refer potential customers to the retailer or retailers who have click-through ads or links on its website or webpage and Advertising Corporation’s mailers and emails are advertisements, not solicitations. Therefore, paragraph (3) does not apply to the agreements between Corporation X and the retailer or retailers who have ads or links on Corporation X’s website or webpage.
(C) Same as (B) above, except that an individual representative of Corporation X or any other individual acting on behalf of Corporation X, including, but not limited to, an employee or independent contractor of Corporation X or Advertising Corporation, engages in solicitation activities, such as soliciting customers in person, soliciting customers on the telephone, handing out flyers that are solicitations, or sending emails that are solicitations, while physically present in California that refer potential California customers to a retailer who has a click-through ad or link on Corporation X’s website or webpage under Corporation X’s agreement with that retailer. Therefore, paragraph (3) does apply to Corporation X’s agreement with that retailer and that retailer will be required to register with the Department to collect use tax if:
(i) The total cumulative sales price of all of the tangible personal property the retailer sold to purchasers in California that were referred to the retailer by a person or persons in California pursuant to an agreement or agreements described in paragraph (3), in the preceding 12 months, is in excess of ten thousand dollars ($10,000); and
(ii) The retailer’s total cumulative sales of tangible personal property to purchasers in California is in excess of one million dollars ($1,000,000) in the preceding 12 months.
(d) Exceptions.
(1) Webpages and Internet Service Providers. The use of a computer server on the Internet to create or maintain a web page or site by a retailer will not be considered a factor in determining whether the retailer has a physical presence in California, unless the computer server is located in California and the retailer owns or leases the computer server. No Internet Service Provider, On-line Service Provider, internetwork communication service provider, or other Internet access service provider, or web hosting services shall be deemed the agent or representative of any out-of-state retailer as a result of the service provider maintaining or taking orders via a web page or site on a computer server that is physically located in this state.
(2) Warranty and Repair Services. A retailer is not "engaged in business in this state" based solely on its use of a representative or independent contractor in this state for purposes of performing warranty or repair services with respect to tangible personal property sold by the retailer, provided that the ultimate ownership of the representative or independent contractor so used and the retailer is not substantially similar. For purposes of this paragraph, "ultimate owner" means a stock holder, bond holder, partner, or other person holding an ownership interest.
(3) Convention and Trade Show Activities. For purposes of this subdivision, the term "convention and trade show activity" means any activity of a kind traditionally conducted at conventions, annual meetings, or trade shows, including, but not limited to, any activity one of the purposes of which is to attract persons in an industry generally (without regard to membership in the sponsoring organization) as well as members of the public to the show for the purpose of displaying industry products or to stimulate interest in, and demand for, industry products or services, or to educate persons engaged in the industry in the development of new products and services or new rules and regulations affecting the industry.
Except as provided in this paragraph, a retailer is not "engaged in business in this state" based solely on the retailer’s convention and trade show activities provided that:
(A) For the period commencing on January 1, 1998 and ending on December 31, 2000, the retailer, including any of his or her representatives, agents, salespersons, canvassers, independent contractors, or solicitors, does not engage in those convention and trade show activities for more than seven days, in whole or in part, in this state during any 12-month period and did not derive more than ten thousand dollars ($10,000) of gross income from those activities in this state during the prior calendar year;
(B) For the period commencing on January 1, 2001, the retailer, including any of his or her representatives, agents, salespersons, canvassers, independent contractors, or solicitors, does not engage in those convention and trade show activities for more than fifteen days, in whole or in part, in this state during any 12-month period and did not derive more than one hundred thousand dollars ($100,000) of net income from those activities in this state during the prior calendar year.
A retailer coming within the provisions of this subdivision is, however, "engaged in business in this state," and is liable for collection of the applicable use tax, with respect to any sale of tangible personal property occurring at the retailer’s convention and trade show activities and with respect to any sale of tangible personal property made pursuant to an order taken at or during those convention and trade show activities.
(e) Registration.
(1) A retailer that is required to register with the Department pursuant to subdivision (a) must register for a Certificate of Registration-Use Tax.
(2) Retailers who are not engaged in business in this state may voluntarily apply for a Certificate of Registration-Use Tax. Holders of such certificates are required to collect use tax from purchasers, give receipts therefor, and pay the tax to the Department in the same manner as retailers engaged in business in this state.
(3) A retailer required to be registered with the Department is required to remain registered with the Department during any calendar year that it has a physical presence in this state that is sufficient to establish a substantial nexus with this state for purposes of the Commerce Clause of the United States Constitution, including, but not limited to, a physical presence described in subdivision (c)(1), or the total combined sales of tangible personal property for delivery in this state by the retailer and all persons related to the retailer exceed the five hundred thousand dollar ($500,000) threshold set forth in subdivision (b)(4), and during the following calendar year. A retailer is not required to remain registered on January 1 of any subsequent calendar year if:
(A) On that date and at all times during the preceding calendar year, the retailer does not have a physical presence in this state sufficient to establish a substantial nexus with this state for purposes of the Commerce Clause of the United States Constitution; and
(B) During the preceding calendar year, the total combined sales of tangible personal property for delivery in this state by the retailer and all persons related to the retailer did not exceed the five hundred thousand dollar ($500,000) threshold set forth in subdivision (b)(4).
(4) If a retailer is not required to remain registered pursuant to this regulation, then the retailer may:
(A) Voluntarily maintain its registration with the Department and continue to collect, report, and remit use tax in accordance with subdivision (e)(2); or
(B) Close its Certificate of Registration-Use Tax with the Department, and stop collecting use tax after its certificate is closed.
However, the provisions of this regulation continue to apply to a retailer that closes its Certificate of Registration-Use Tax, and a retailer should not close its certificate if it anticipates that it will be required to re-register with the Department during the current calendar year.
Example 1: Retailer D had no physical presence in California in calendar years 2018 through 2021. Retailer D’s total combined sales for delivery in California exceeded $500,000 during calendar year 2018, but not in calendar years 2019, 2020, or 2021. Retailer D registered with the Department during 2019 and was required to remain registered and collect use tax during the remainder of the year. Retailer D had the option to voluntarily maintain its Certificate of Registration-Use Tax with the Department for calendar years 2020 and 2021 or close its certificate on or after January 1, 2020, and stop collecting use tax after its certificate is closed.
Example 2: Retailer E had no physical presence in California in calendar years 2018 through 2021. Retailer E’s total combined sales for delivery in California exceeded $500,000 in calendar 2019, but not in calendar years 2018, 2020, or 2021. Retailer E registered with the Department during 2019 and was required to remain registered and collect use tax during the remainder of the year and all of calendar year 2020. Retailer E had the option to voluntarily maintain its Certification of Registration-Use Tax with the Department for calendar year 2021 or close its certificate on or after January 1, 2021, and stop collecting use tax after its certificate is closed.
Example 3: Retailer F had a place of business in California and used its own website to make retail sales of camping equipment. On November 1, 2019, Retailer F closed its place of business in California, moved to a new place of business in Wyoming, and no longer had any physical presence in California. However, Retailer F continued to make retail sales for delivery in California using its own website, but had less than $500,000 in total combined sales of tangible personal property for delivery in California during 2020 and 2021. Retailer F was required to remain registered and collect use tax during the remainder of calendar year 2019 and all of calendar year 2020. Retailer F had the option to voluntarily maintain its Certificate of Registration-Use Tax with the Department for calendar year 2021 or close its certificate on or after January 1, 2021, and stop collecting use tax after its certificate is closed.
Example 4: Retailer G had no physical presence in California in calendar years 2018 through 2021. Retailer G’s total combined sales for delivery in California were $450,000 in calendar year 2018, $600,000 in calendar year 2019, and $490,000 in calendar year 2020, and Retailer G planned to increase its advertising in California and anticipated that the advertising would increase its sales for delivery in California. Retailer G registered with the Department during calendar year 2019 and was required to remain registered and collect use tax during the remainder of the year and all of calendar year 2020. Retailer G had the option to voluntarily maintain its Certificate of Registration-Use Tax with the Department for calendar year 2021 or close its Certificate of Registration-Use Tax on or after January 1, 2021, and stop collecting use tax after its certificate is closed. Retailer G chose to close its Certificate of Registration – Use Tax on January 1, 2021. However, Retailer G probably should not have closed its certificate because it anticipated that it would be required to re-register with the Department due to the total combined sales of tangible personal property for delivery in California by the retailer and all persons related to the retailer during calendar year 2021.
(f) Use Tax Direct Payment Permit Exemption Certificates. Notwithstanding subdivisions (a) and (d)(3), a retailer who takes a use tax direct payment exemption certificate in good faith from a person holding a use tax direct payment permit is relieved from the duty of collecting use tax from the issuer on the sale for which the certificate is issued. Such certificate must comply with the requirements of Regulation 1699.6, Use Tax Direct Payment Permits.
(g) Tax as Debt. The use tax required to be collected by the retailer and any amount unreturned to the customer which is not tax but was collected from the customer under the representation that it was tax constitute debts owed by the retailer to the state.
(h) Refunds of Excess Collections. Whenever the Department ascertains that a retailer has collected use tax from a customer in excess of the amount required to be collected or has collected from a customer an amount which was not tax but was represented by the retailer to the customer as being use tax, no refund of such amount shall be made to the retailer even though the retailer has paid the amounts so collected to the state. Section 6901 of the Revenue and Taxation Code requires that any overpayment of use tax be credited or refunded only to the purchaser who made the overpayment.
(i) Amendments.
(1) The 2012 amendments to this regulation adopted to implement, interpret, and make specific the provisions of section 6203 of the Revenue and Taxation Code as re-enacted by Statutes 2011, chapter 313 (Assem. Bill No. 155), section 3, became operative on September 15, 2012. Any 2012 amendment that implements, interprets and makes specific a use tax collection obligation that did not exist on June 27, 2011, shall not have any retroactive effect.
(2) The amendments to this regulation adopted to implement, interpret, and make specific the provisions of section 6203 of the Revenue and Taxation Code as amended by Statutes 2019, chapter 5 (Assem. Bill No. 147), section 3 shall be operative April 1, 2019, and any amendment that implements, interprets and makes specific a use tax collection obligation that did not exist on March 31, 2019, shall not have any retroactive effect prior to April 1, 2019.
(3) If the amendments to section 6203 made by Statutes 2019, chapter 5, section 3 are held in a final decision of a court of competent jurisdiction to violate the substantial nexus standard of the Commerce Clause of the United States Constitution, then on the date of that final decision, subdivision (c)(2) and (3) of this regulation shall become operative and subdivision (b)(4) of this regulation and any provisions of this regulation implementing, interpreting, or making specific subdivision (b)(4) shall become inoperative, notwithstanding the operative dates set forth therein.
History—Adopted August 7, 1957, as restatement of previous ruling, effective September 11, 1957.
Amended August 2, 1965, applicable on and after August 1, 1965.
Amended October 8, 1968.
Amended and renumbered November 3, 1969, effective December 5, 1969.
Amended July 27, 1988, effective November 11, 1988. In subdivision (a), included reference to Section 6203 of the Revenue and Taxation Code which defines a "retailer engaged in business in this state."
Amended September 10, 1997, effective November 27, 1997. New third and fourth paragraphs added to subdivision (a).
Adopted September 1, 1999, effective October 5, 1999. Added new un-numbered fifth paragraph to subdivision (a) for provisions of section 6203(e) (Statutes of 1997, Chapter 621) concerning trade show and convention activities by out-of-state retailers. Also added new subdivision (c) for provisions of section 7051.3 (Statutes of 1997 Chapter 702 (SB-110)) concerning exemption certificates for use tax direct pay permits. Relettered subdivisions (c) to (d) and (d) to (e).
Amended May 31, 2001, effective August 1, 2001. New subdivision (b) added. Language "For … industry." added. Language of former fourth unnumbered paragraph of the regulation incorporated as new subdivision (b)(1) and phrase "For … 2000," added. New subdivision (b)(2) added. Ensuing subdivisions redesignated accordingly.
Amended May 30, 2012, effective August 26, 2012. Added new subdivisions (b), (c) and (i) to incorporate amendments made to RTC section 6203 by section 3 of Assembly Bill Number 155 (Stats. 2011, ch. 313). Portions of subdivision (a) moved to newly created subdivisions (c)(1)(B), (d)(1) and (d)(2). In new subdivision (d)(1) added "unless the computer server is located in California and the retailer owns or leases the computer server". Renumbered prior subdivision (b) as subdivision (d)(3), and prior subdivisions (c) through (f) as subdivisions (e) through (h), respectively. The amendments will be operative September 15, 2012.
Amended July 17, 2014, effective September 30, 2014. Changes without regulatory effect to subdivision (i) to clarify that RTC section 6203, as re-enacted by Statutes 2011, chapter 313 (Assem. Bill No. 155) became operative on September 15, 2012, and the 2012 amendments to the regulation to implement, interpret, and make specific the provisions of re-enacted section 6203 also became operative on September 15, 2012.
Amendments filed and effective March 30, 2020. The amendments added "use" before "tax" in subdivision (a); replaced "Board" with "Department" in subdivisions (a), (c)(9)(C), (e), and (h); replaced "General Definition" with "Definitions" in the title of subdivision (b); replaced "A" with "On and after September 15, 2012, a" at the beginnings of subdivisions (b)(1) and (c)(1); added "retailers described in subdivision (b)(4), on and after April 1, 2019," and added "(1), on and after September 15, 2012, and retailers described in subdivision (c)(2) and (3), from September 15, 2012, through March 31, 2019" to subdivision (b)(1); added "otherwise" to and replaced "subdivisions (c) and (d)," with "this regulation, on and after September 15, 2012," in subdivision (b)(2); added subdivision (b)(4); replaced "A" with "From September 15, 2012, through March 31, 2019, a" at the begin of subdivision (c)(2) and (3); replaced "World Wide Web" with "web" in two places and replaced "substantial nexus with" with "physical presence in" in subdivision (d)(1); changed the title of subdivision (e); reformatted the text of subdivision (e) as subdivision (e)(2); added subdivision (e)(1), (3), and (4); added "voluntarily" to and deleted the last sentence from subdivision (e)(2); added "use" to subdivision (g); reformatted subdivision (i) as subdivision (i)(1); deleted the first sentence from subdivision (i)(1); added "Statutes 2011," and "(Assem. Bill No. 155)" in subdivision (i)(1); and added subdivision (i)(2) and (3).
Regulation 1684.5. Marketplace Sales.
Reference: Sections 6041, 6041.1, 6041.5, 6042, 6043, 6044, 6045, 6046 and 6203, Revenue and Taxation Code.
(a) Definitions.
(1) "Branding sales as those of the marketplace facilitator" means using any means, including, but not limited to a name, logo, sign, symbol, or a combination of these, to identify the marketplace facilitator as the person selling a marketplace seller’s tangible personal property. If a marketplace seller is expressly identified as the person selling the marketplace seller’s tangible personal property, the sale of that property is not branded as a sale of the marketplace facilitator.
(2) "Delivery network company" means a business entity that maintains an internet website or mobile application used to facilitate delivery services for the sale of local products. A person that is a delivery network company is not a marketplace facilitator, unless it makes an election to be deemed a marketplace facilitator pursuant to subdivision (e) of this regulation. Nothing in this regulation shall preclude a delivery network company from being a retailer as defined in Revenue and Taxation Code section 6015.
(3) "Delivery services" means the pickup of one or more local products from a local merchant and delivery of the local products to a customer. "Delivery services" do not include any delivery requiring over 75 miles of travel from the local merchant to the customer.
(4) "Facilitate." For purposes of this regulation, a person contracts with a marketplace seller to facilitate the sale of the marketplace seller’s products through a marketplace if the person agrees to do anything directly or indirectly, through one or more related persons, that makes it possible or easier for the marketplace seller to sell its products through the marketplace. Also, a marketplace facilitator facilitates a sale by a marketplace seller through its marketplace if it does anything directly or indirectly, through one or more related persons, that makes it possible or easier for the marketplace seller to make the sale through the marketplace. Such activities include, but are not limited to listing products for sale, communicating the offer or acceptance between the buyer and seller, taking orders for merchandise, or providing payment processing or fulfillment services.
(5) "Fulfillment or storage services" means any services related to receiving, storing, or shipping a marketplace seller’s tangible personal property, including, but not limited to, picking, packing, shipping, or delivering a marketplace seller’s tangible personal property to fulfill an order.
(6) "Listing products for sale" means creating or posting or authorizing or providing the means for another person to create or post a written, verbal, pictorial, graphic, or similar means of announcement of tangible personal property for sale in a marketplace, including, but not limited to, an advertisement that contains an announcement of tangible personal property for sale.
(7) "Local merchant" means a third-party merchant, including, but not limited to, a kitchen, restaurant, grocery store, retail store, convenience store, or business of another type, that is not under common ownership or control with the delivery network company.
(8) "Local product" means any item, including food, other than freight, mail, or a package to which postage has been affixed.
(9) "Marketplace" means a physical or electronic place, including, but not limited to, a store, booth, internet website, catalog, television or radio broadcast, or a dedicated sales software application, where marketplace sellers sell or offer for sale tangible personal property for delivery in this state regardless of whether the tangible personal property, marketplace sellers, or marketplace has a physical presence in this state.
Example 1. Company A owns and operates a website where multiple marketplace sellers offer to sell and sell tangible merchandise for delivery in California. Therefore, Company A’s website is a marketplace.
Example 2. Company B owns and operates a website that aggregates the tangible merchandise listed for sale in marketplace sellers’ online stores on a single searchable platform where the marketplace sellers offer to sell and sell the tangible merchandise for delivery in California. Therefore, Company B’s website is a marketplace.
Example 3. Company C owns and operates its own website where it is the only seller offering to sell and selling tangible merchandise and services. Company C sells web hosting and related services to Sellers D and E, including payment processing services. Sellers D and E use the services to create their own unique e-commerce websites where each of them is the only seller offering to sell and selling tangible merchandise. Therefore, Company C’s, Seller D’s, and Seller E’s websites are not marketplaces.
(10) "Marketplace facilitator" means a person who contracts with marketplace sellers to facilitate for consideration, regardless of whether deducted as fees from the transaction, the sale of the marketplace seller’s products through a marketplace operated by the person or a related person and who does both of the following:
(A) Directly or indirectly, through one or more related persons, engages in any of the following:
(i) Transmitting or otherwise communicating the offer or acceptance between the buyer and seller.
(ii) Owning or operating the infrastructure, electronic or physical, or technology that brings buyers and sellers together in a marketplace.
(iii) Providing a virtual currency that buyers are allowed or required to use to purchase products from the seller.
(iv) Software development or research and development activities related to any of the activities described in subdivision (a)(10)(B) of this regulation, if such activities are directly related to a marketplace operated by the person or a related person.
(B) Directly or indirectly, through one or more related persons, engages in any of the following activities with respect to the marketplace seller’s products:
(i) Payment processing services.
(ii) Fulfillment or storage services.
(iii) Listing products for sale.
(iv) Setting prices.
(v) Branding sales as those of the marketplace facilitator.
(vi) Order taking.
(vii) Providing customer service or accepting or assisting with returns or exchanges.
A person that engages in any of the activities in subdivisions (a)(10)(B)(ii) through (vii) with respect to the marketplace seller’s products is not required to provide payment processing services to be a marketplace facilitator.
Example 4: Company A owns and operates a website where multiple sellers sell and offer to sell merchandise for delivery in California. Company A also enters into contracts to facilitate the sale of the sellers’ merchandise through its website for a fee and provides payment processing services for sales of these sellers’ merchandise sold through its website. Therefore, Company A is a marketplace facilitator.
(11) "Marketplace seller" means a person who has an agreement with a marketplace facilitator and makes retail sales of tangible personal property through a marketplace owned, operated, or controlled by a marketplace facilitator, even if that person would not have been required to hold a seller’s permit or permits, or required to collect the use tax imposed pursuant to chapter 3 (commencing with section 6201) of part 1 of division 2 of the Revenue and Taxation Code, had the sale not been made through that marketplace.
(12) "Order taking" means the process of getting or obtaining a buyer’s order for a marketplace seller’s tangible personal property by telephone, fax, email or any other physical or electronic means, including, but not limited to, the customer including the items in a physical or virtual shopping cart at checkout.
(13) "Payment order" means a written instruction or order to pay money signed by the person giving the instruction whether created in electronic or paper format.
(14) "Payment processing services" means any services related to charging a buyer the price to purchase a marketplace seller’s tangible personal property, collecting, handling, or processing the payment, and transmitting any portion of the payment to the marketplace seller. Such services include, but are not limited to, providing a physical or virtual credit or debit card terminal, integrating payment processing with an online shopping cart at checkout, or otherwise directly or indirectly authorizing or providing the means for payment processing in any manner. Payment methods may include, but are not limited to, credit cards, debit cards, prepaid cards, stored value cards, Automated Clearing House (ACH) debits, and payment orders, whether accomplished through the use of software or otherwise.
(15) "Providing customer service or accepting or assisting with returns or exchanges" means providing any service related to a marketplace seller’s tangible personal property to a potential buyer with or without the marketplace seller’s authorization, including, but not limited to, answering a question about the property or the terms of its sale. It also means providing any service to a buyer related to their purchase of a marketplace seller’s tangible personal property with or without the marketplace seller’s authorization, including, but not limited to, answering a question about the property’s use, assisting with fixing or trouble shooting a problem with the property, assisting the buyer with requesting a refund or credit for the property or requesting to exchange the property for other property, or accepting the buyer’s return of the property or exchanging the buyer’s property for other property.
(16) "Related person." For the purposes of this regulation, a person is related to another person if both persons are related to each other pursuant to section 267(b) of the Internal Revenue Code and the regulations thereunder.
(17) "Setting prices" means establishing a price or prices at which an item is offered for sale or sold to customers and includes establishing a price at which an item must be sold or a minimum or maximum price, below or above which an item cannot be sold.
(18) "Virtual currency" is a digital representation of value that functions as a medium of exchange, a unit of account, or a store of value, but which does not have legal tender status in any jurisdiction. Virtual currency does not include retailer coupons or gift cards.
(b) Registration Requirements for Marketplace Facilitators and Marketplace Sellers.
(1) On and after October 1, 2019, a marketplace facilitator shall be considered the seller and retailer for each sale facilitated through its marketplace for purposes of determining whether the marketplace facilitator is required to register with the Department for a seller’s permit or Certificate of Registration - Use Tax, in addition to each sale for which the marketplace facilitator is the seller or retailer or both under chapter 1 (commencing with section 6001) of part 1 of division 2 of the Revenue and Taxation Code. Also, on and after October 1, 2019, for purposes of determining whether a marketplace facilitator is a retailer engaged in business in this state because its total combined sales of tangible personal property for delivery in this state exceed the $500,000 threshold in Revenue and Taxation Code section 6203, subdivision (c)(4), the marketplace facilitator shall include all sales of tangible personal property for delivery in this state, including sales made on its own behalf and by all related persons and sales facilitated on behalf of marketplace sellers, regardless of whether the sales are taxable.
Example 5: Company A is a marketplace facilitator with no physical presence in California. Company A did not make or facilitate any sales of tangible merchandise for delivery in California during 2018. From January 1, 2019, to September 30, 2019, Company A sold $300,000 of tangible merchandise for delivery in California on its own behalf and facilitated sales of $250,000 of tangible merchandise for delivery in California through its marketplace for Seller A, a marketplace seller. Since the total combined sales of tangible merchandise for delivery in California exceeded the $500,000 threshold in Revenue and Taxation Code section 6203, subdivision (c)(4), during 2019 and prior to October 1, 2019, Company A is a retailer engaged in business in this state on October 1, 2019, and must register with the Department for a Certificate of Registration - Use Tax, and collect and remit use tax beginning October 1, 2019.
(2) On and after October 1, 2019, a marketplace seller is the seller for sales and the retailer for retail sales made on its own behalf and not facilitated through a registered marketplace facilitator, for purposes of determining whether the marketplace seller is required to register with the Department for a seller’s permit or Certificate of Registration - Use Tax. On and after October 1, 2019, a marketplace seller is not required to register with the Department for a seller's permit if it does not make any sales of tangible personal property in this state, except for sales facilitated by marketplace facilitators who are the sellers and retailers for purposes of those sales pursuant to subdivision (c) of this regulation. On and after October 1, 2019, a marketplace seller is not required to register with the Department for a Certificate of Registration - Use Tax if it does not make any sales of tangible personal property for storage, use, or other consumption in this state, except for sales facilitated by marketplace facilitators who are the sellers and retailers for purposes of those sales pursuant to subdivision (c) of this regulation. Also, on and after October 1, 2019, for purposes of determining whether a marketplace seller is a retailer engaged in business in this state because its total combined sales of tangible personal property for delivery in this state exceed the $500,000 threshold in Revenue and Taxation Code section 6203, subdivision (c)(4), the marketplace seller shall include all sales of tangible personal property for delivery in this state, including sales made on its own behalf and sales facilitated through any marketplace facilitator’s marketplace, regardless of whether the sales are taxable.
Example 6: Seller A is a marketplace seller that has no physical presence in California. Seller A did not make more than $500,000 in sales of tangible merchandise for delivery in California during 2018, and from January 1, 2019, to September 30, 2019, Seller A made $200,000 in sales of tangible merchandise for delivery in California that were facilitated through a marketplace facilitator’s marketplace and made $299,500 in sales of tangible merchandise for delivery in California through its own website. Therefore, on October 1, 2019, Seller A is not a retailer engaged in business in this state and is not required to be registered with the Department. However, on October 2, 2019, Seller A made a $900 sale of tangible merchandise for delivery in California through its website that when combined with its other sales exceeded the $500,000 threshold in Revenue and Taxation Code section 6203, subdivision (c)(4). Therefore, Seller A is a retailer engaged in business in this state and required to register with the Department for a Certificate of Registration - Use Tax immediately after the $900 sale on October 2, 2019. Also, Seller A is required to collect and remit use tax on its subsequent retail sales to California customers, except for its retail sales facilitated by marketplace facilitators who are the sellers and retailers for purposes of those sales pursuant to subdivision (c) of this regulation.
Example 7: Seller B is a marketplace seller that leases spaces in a California warehouse where it stores some of its inventory and fulfills some of its orders. However, on and after October 1, 2019, Seller B will only make sales of tangible merchandise in California or for delivery in California that are facilitated by Company C, a marketplace facilitator who will be the seller and retailer for purposes of those sales pursuant to subdivision (c) of this regulation. Therefore, on and after October 1, 2019, Seller B will not be the retailer responsible for paying sales tax or collecting and remitting use tax on its sales in California or for delivery in California and Seller B will not be required to be registered with the Department for a seller's permit or Certificate of Registration - Use Tax on and after October 1, 2019.
(c) When a Marketplace Facilitator is the Seller and Retailer.
A marketplace facilitator that is registered with the Department or required to register with the Department for a seller’s permit or Certificate of Registration - Use Tax and facilitates a retail sale of tangible personal property by a marketplace seller on or after October 1, 2019, is the retailer selling or making the sale of the tangible personal property sold through its marketplace. Therefore, the marketplace facilitator is the retailer responsible for paying sales tax or collecting and remitting use tax on that sale and the marketplace seller is not the retailer responsible for paying sales tax or collecting and remitting use tax on that sale, unless the marketplace facilitator qualifies for relief from liability for the tax on that sale pursuant to Revenue and Taxation Code section 6046.
Example 8: Company A is a marketplace facilitator that is currently registered for a seller’s permit with the Department. Company A enters into an agreement with Company B, a marketplace seller, to facilitate sales of Company B’s tangible merchandise through Company A’s marketplace. Company B provides Company A with sufficient information for Company A to determine the correct amount of tax due on the retail sales of Company B’s merchandise for delivery in California. Therefore, when Company A facilitates a retail sale of Company B’s tangible merchandise for delivery in California through its marketplace on or after October 1, 2019, Company A is the retailer selling or making the sale of the merchandise sold for delivery in California and the retailer responsible for paying sales tax or collecting and remitting use tax on that sale, and Company B is not the retailer responsible for paying sales tax or collecting and remitting use tax on that sale.
Example 9: The facts are the same as in example 8, except that Company A is not registered or required to be registered with the Department for a seller’s permit or Certificate of Registration - Use Tax on October 1, 2019, because it does not have a physical presence in California, it did not make any sales for delivery in California during 2018, and it only made or facilitated $250,000 in total combined sales of tangible merchandise for delivery in California from January 1, 2019, through September 30, 2019. Also, Company B is required to be registered with the Department for a Certificate of Registration - Use Tax on October 1, 2019, because it made $550,000 in sales of merchandise for delivery in California from January 1, 2019, through September 30, 2019, and it makes sales for storage, use or other consumption in California that are not facilitated through a registered marketplace facilitator. Therefore, when Company A facilitates a sale of Company B’s merchandise through its marketplace on October 1, 2019, Company B is the retailer selling or making the sale of the merchandise and the retailer responsible for collecting and remitting use tax on that sale, and Company A is not the retailer responsible for collecting and remitting use tax on that sale.
(d) Advertising.
A person, including, but not limited to, a person who operates a newspaper or internet website, that advertises tangible personal property for sale, refers purchasers to the seller by telephone, mail, email, website address, internet link, or other similar means to complete the sale, and does not participate further in the sale is not facilitating the sale. Therefore, the person is not considered the seller and retailer for the sale for purposes of determining whether the person is required to register with the Department under subdivision (b)(1) and the person is not the retailer selling or making the sale of the tangible personal property under subdivision (c), regardless of whether the person is a marketplace facilitator, the seller is a marketplace seller, the tangible personal property is advertised in a marketplace, or the advertisement contains an offer to sell tangible personal property.
Example 10: Company A provides internet access and digital television services. Company A sells advertising space on its website and television service and allows sellers to include the picture, description, and sales price of their merchandise and the address of or internet link to their website, so that Company A may refer potential purchasers to the sellers to complete sales of the tangible merchandise advertised for sale on Company A’s website or television service. Company A does not otherwise participate further in the sales, such as taking orders or providing payment processing or fulfillment services. Therefore, Company A is not facilitating the sales of tangible merchandise through the advertisements on its website or television service, Company A is not the seller and retailer for those sales for purposes of determining whether Company A is required to register with the Department under subdivision (b)(1), and Company A is not the retailer selling or making the sales of that merchandise under subdivision (c).
Example 11: Company B is a marketplace facilitator that facilitates sales of tangible merchandise by marketplace sellers through its website and is currently registered for a seller’s permit with the Department. In addition, Company B sells advertising space on its website and allows sellers advertising on its website to include a picture, description, and sales price of their merchandise and an internet link to their website in their advertisements, so that Company B may refer potential purchasers to the seller’s website to complete sales of the tangible merchandise advertised for sale on Company B’s website. Company B does not otherwise participate further in the sales of merchandise advertised for sale on its website, such as by taking orders, or providing payment processing or fulfillment services. Therefore, Company B is not facilitating the retail sales of tangible merchandise made through the advertisements on its website, Company B is not the seller and retailer for those sales for purposes of determining whether Company B is required to register with the Department under subdivision (b)(1), and Company B is not the retailer selling or making the sales of that merchandise under subdivision (c).
Example 12: The facts are the same as in example 11, except that Company B offers an email relay service to sellers that advertise on its website whereby Company B will refer potential purchasers to the sellers to complete sales using an email relay service that masks the purchasers’ and sellers’ personal email addresses. The provision of such an email relay service does not constitute participation in the sales of the tangible merchandise advertised for sale on its website beyond advertising the merchandise for sale and referring the purchaser to the seller to complete the sale. Therefore, Company B is not facilitating the retail sales of tangible merchandise made through the advertisements on its website, Company B is not the seller and retailer for those sales for purposes of determining whether Company B is required to register with the Department under subdivision (b)(1), and Company B is not the retailer selling or making the sales of that merchandise under subdivision (c).
Example 13: The facts are the same as in example 11, except that Company B will take orders for sellers that advertise on its website to make it easier for them to sell their merchandise through Company B’s website. Therefore, when Company B takes an order for a sale of tangible merchandise advertised for sale on its website, Company B is facilitating the sale of that merchandise, Company B is the seller and retailer for that sale for purposes of determining whether Company B is required to register with the Department under subdivision (b)(1), Company B is the retailer selling or making the sale of that merchandise under subdivision (c), and Company B is responsible for paying sales tax or collecting and remitting use tax on that sale.
Example 14: The facts are the same as in example 11, except that Company B will provide payment processing services to sellers that advertise on its website to make it easier for them to sell their merchandise through Company B’s website. Therefore, when Company B provides payment processing services for a sale of tangible merchandise advertised for sale on its website, Company B is facilitating the sale of that merchandise, Company B is the seller and retailer for that sale for purposes of determining whether Company B is required to register with the Department under subdivision (b)(1), Company B is the retailer selling or making the sale of that merchandise under subdivision (c), and Company B is responsible for paying sales tax or collecting and remitting use tax on that sale.
(e) Election.
(1) A delivery network company that meets the definition of marketplace facilitator in subdivision (a) of this regulation may elect to be deemed a marketplace facilitator.
(2) To be deemed a marketplace facilitator a delivery network company must register with the Department for a Seller’s Permit or a Certificate of Registration - Use Tax, whichever is applicable, unless the delivery network company is already registered, and submit a written or electronic statement signed by an authorized representative that includes an election to be deemed a marketplace facilitator and a voluntary agreement to remain registered with the Department while its election is in effect.
(3) An election is effective at the beginning of the next reporting period starting after the date the election is received by the Department and remains in effect until the beginning of the next reporting period starting after the date the Department receives a written or electronic statement from the delivery network company that it is cancelling its election, which is signed by an authorized representative.
(4) A delivery network company that makes such an election and facilitates a retail sale of tangible personal property by a marketplace seller through its marketplace for delivery in California while its election is in effect shall be the retailer selling or making the sale of the tangible personal property and the retailer responsible for paying sales tax or collecting and remitting use tax on that sale.
History—New regulation filed June 29, 2020, as an emergency; effective and operative June 29, 2020. A Certificate of Compliance must be transmitted to the Office of Administrative Law by June 28, 2022, or the regulation will be repealed by operation of law on the following day.
Emergency regulation repealed by operation of law on June 29, 2022.
New regulation filed August 28, 2023; operative August 28, 2023 (Register 2023, No. 35). The new regulation mirrors the repealed emergency regulation, except for the following amendments which: deleted subdivision (a)(1) defining "Automated Clearing House Debit" and renumbered subdivisions (a)(2), (3), (4), and (5) as subdivisions (a)(1), (2), (3), and (4); replaced "product" with "tangible personal property" in the first sentence in and added the second sentence to renumbered subdivision (a)(1); replaced "(d)" with "(e)" in renumbered subdivision (a)(2); replaced "easy" with "possible" in two places in and added "listing products for sale," to renumbered subdivision (a)(4); reformatted the first sentence in renumbered subdivision (a)(4)(A), as the first sentence in new subdivision (d) and deleted the rest of renumbered subdivision (a)(4)(A), including examples 1, 2, and 3, which provided that "However, a person, including, but not limited to a person who operates a newspaper or internet website, that advertises tangible personal property for sale, refers purchasers to the seller by telephone, mail, email, website address, internet link, or other similar means to complete sales, and does not participate further in the sales is not facilitating the sales for purposes of this regulation. Therefore, such a person is not a marketplace facilitator for purposes of the sales. Example 1: Company A is a marketplace facilitator that facilitates sales of tangible merchandise by marketplace sellers through its website. In addition, Company A sells advertising space on its website and allows sellers to include the picture, description, and sales price of their merchandise. Company A also allows the sellers to provide an internet link to the seller’s website so that Company A may refer potential purchasers to these sellers to complete sales of the tangible merchandise advertised for sale on Company A’s website. Company A does not otherwise participate further in the sales, such as taking orders or providing payment processing or fulfillment services. Therefore, Company A is not facilitating the sales of tangible merchandise made through the advertisements on its website and Company A is not a marketplace facilitator for purposes of those sales. Example 2: The facts are the same as in example 1, except that Company A offers an email relay service to sellers that advertise on its website whereby Company A provides a fabricated email address to both the buyer and seller to mask their personal email addresses. The provision of such an email relay service does not constitute participation in the sale of the tangible merchandise advertised for sale on its website beyond advertising the merchandise for sale and referring the purchaser to the seller to complete the sale. Therefore, Company A is not facilitating the sales of tangible merchandise made through the advertisements on its website and Company A is not a marketplace facilitator for purposes of those sales. Example 3: The facts are the same as in example 1, except that Company A also contracts to provide payment processing services to sellers that advertise on its website to make it easier for them to sell their merchandise through the website. Therefore, Company A is facilitating the sales of the tangible merchandise made through the advertisements on its website and Company A is a marketplace facilitator for purposes of those sales"; added new subdivision (a)(5); replaced "Products for Sale" with "products for sale" and "goods" with "tangible personal property" in and added "creating or posting or authorizing or providing the means for another person to create or post" and "in a marketplace, including, but not limited to, an advertisement that contains an announcement of tangible personal property for sale" to subdivision (a)(6); replaced "a marketplace seller sells or offers" with "marketplace sellers sell or offer" and replaced "seller" with "sellers" in and added examples 1, 2, and 3 to subdivision (a)(9); added "in a marketplace" to subdivision (a)(10)(A)(ii); added a new sentence to the end of subdivision (a)(10)(B); replaced "third party sellers offer" with "multiple sellers sell and offer" and "third-party sellers’" with "the sellers’" in example 4; added new subdivision (a)(12) and renumbered subdivisions (a)(12) and (13) as subdivisions (a)(13) and (14); replaced "Payment Order" with "Payment order" in renumbered subdivision (a)(13); replaced "‘Payment Processing Services’ means providing a person, directly or indirectly, with the means used to charge or debit accounts through the use of any payment method or mechanism, including, but not" with "‘Payment processing services’ means any services related to charging a buyer the price to purchase a marketplace seller’s tangible personal property, collecting, handling, or processing the payment, and transmitting any portion of the payment to the marketplace seller. Such services include, but are not limited to, providing a physical or virtual credit or debit card terminal, integrating payment processing with an online shopping cart at checkout, or otherwise directly or indirectly authorizing or providing the means for payment processing in any manner. Payment methods may include, but are not" in renumbered subdivision (a)(14); added new subdivision (a)(15) and renumbered subdivisions (a)(14), (15), and (16) as subdivisions (a)(16), (17), and (18); replaced "Related Person" with "Related person" in renumbered subdivision (a)(16), "Setting Prices" with "Setting prices" in renumbered subdivision (a)(17), and "Virtual Currency" with "Virtual currency" in renumbered subdivision (a)(18); deleted renumbered subdivision (a)(18)(A), which provided that "If the consideration for a retail sale of tangible personal property is virtual currency, the measure of tax shall be determined pursuant to Regulation 1654, Barter, Exchange, ‘Trade-ins’ and Foreign Currency Transactions"; replaced "Section 6001" with "section 6001" in and added ", regardless of whether the sales are taxable" to subdivision (b)(1); replaced "shall register with the Department for a seller’s permit or Certificate of registration – Use Tax, as required," with "is the seller for sales and the retailer" in and added ", for purposes of determining whether the marketplace seller is required to register with the Department for a seller’s permit or Certificate of Registration – Use Tax" and ", regardless if whether the sales are taxable" to subdivision (b)(2); deleted "third-party retailer and" from between "a" and "marketplace seller" in example 8; replaced "example 7" with "example 8" in example 9; added new subdivision (d), including examples 11 through 14, which further clarify deleted examples 1, 2, and 3; reformatted subdivision (d) as subdivision (e); and deleted "and Section 7, subdivision (b), Statutes 2019, chapter 5 (Assem. Bill No. 147)" from the authority note.
Regulation 1685. Payment of Tax by Purchasers.
Reference: Sections 6202, 6203, 6367, 6401, and 7051.3, Revenue and Taxation Code.
(a) Purchasers and lessees of tangible personal property, the storage, use, or other consumption of which is subject to the use tax, must pay the tax:
(1) To the person from whom such property is purchased or leased, if such person holds a seller's permit or a Certificate of Registration—Use Tax.
(2) Directly to the board if the person from whom the tangible personal property is purchased or leased does not hold such a permit or certificate.
Purchasers and lessees should not pay the tax to a person who does not hold either a seller's permit or a Certificate of Registration—Use Tax. Purchasers and lessees will be liable for payment of tax to the board unless receipts are obtained from sellers holding a seller's permit or a Certificate of Registration—Use Tax.
(b) Payment by Persons Holding Use Tax Direct Payment Permits. Notwithstanding the provisions of subdivision (a), persons who obtain use tax direct payment permits and issue use tax direct payment exemption certificates in good faith to the persons from whom tangible personal property, the storage, use, or other consumption of which is subject to the use tax is purchased, shall not pay the use tax to such persons but shall self-assess and pay state and local use tax under Part 1 (commencing with Section 6001), Part 1.5 (commencing with Section 7200), and, if applicable, Part 1.6 (commencing with Section 7251) directly to the Board. Use tax direct payment permits and exemption certificates must comply with the requirements of Regulation 1699.
History—Amended June 23, 1966.
Applicable as amended on and after July 1, 1966.
Amended and renumbered August 5, 1969, effective September 6, 1969.
Amended September 1, 1999, effective October 21, 1999. New subdivision (b) added to include the provisions of section 7051.3 (Statutes of 1997, Chapter 702 (SB 110)) concerning use tax direct payment permits.
Regulation 1685.5 Calculation of Estimated Use Tax–Use Tax Table.
Reference: Section 6452.1, Revenue and Taxation Code.
(a) In General.
(1) Estimated Use Tax and Use Tax Table. The California Department of Tax and Fee Administration (Department) is required to annually calculate the estimated amount of use tax due according to a person’s adjusted gross income (AGI) and make such amounts available to the Franchise Tax Board (FTB), by July 30 of each year, in the form of a use tax table for inclusion in the instructions to the FTB's returns.
(2) Who is Eligible to Use Department Use Tax Tables.
(A) Consumers may elect to use the use tax tables included in the instructions to their FTB returns to report their estimated use tax liabilities for one or more single nonbusiness purchases of individual items of tangible personal property each with a sales price of less than one thousand dollars ($1,000) on their FTB returns. However, eligible consumers may still calculate their actual use tax liabilities using the worksheets in the instructions to their FTB returns and report their actual use tax liabilities on their FTB returns. Consumers are not required to use the use tax tables included in the instructions to their FTB returns.
(B) The use tax table may not be used to estimate use tax liabilities for business purchases, including purchases made by businesses required to hold a seller's permit or to register with the Department under the Sales and Use Tax Law and report their use tax liabilities directly to the Department.
(3) Safe Harbor. If eligible consumers use the use tax tables included in the instructions to their FTB returns to estimate their use tax liabilities for qualified nonbusiness purchases and correctly report their estimated use tax liabilities for their qualified nonbusiness purchases in accordance with their AGI ranges, then the Department may not assess the difference, if any, between the estimated use tax liabilities reported in accordance with the use tax tables and the consumers’ actual use tax liabilities for qualified nonbusiness purchases.
(b) Definitions and Data Sources.
(1) AGI RANGES. The use tax table shall be separated into fifteen (15) AGI ranges as follows:
(A) AGI less than $10,000;
(B) AGI of $10,000 to $19,999;
(C) AGI of $20,000 to $29,999;
(D) AGI of $30,000 to $39,999;
(E) AGI of $40,000 to $49,999;
(F) AGI of $50,000 to $59,999;
(G) AGI of $60,000 to $69,999;
(H) AGI of $70,000 to $79,999;
(I) AGI of $80,000 to $89,999;
(J) AGI of $90,000 to $99,999;
(K) AGI of $100,000 to $124,999;
(L) AGI of $125,000 to $149,999;
(M) AGI of $150,000 to $174,999;
(N) AGI of $175,000 to $199,999;
(O) AGI more than $199,999
(2) Use Tax Liability Factor or Use Tax Table Percentage. For the 2011 calendar year the use tax liability factor or use tax table percentage shall be 0.070 percent (.0007). On June 1, 2012, the use tax liability factor or use tax table percentage for the current calendar year shall be calculated by multiplying the percentage of income spent on taxable purchases for the preceding calendar year by 0.37, multiplying the product by the average state, local, and district sales and use tax rate, and then rounding the result to the nearest thousandth of a percent. On June 1, 2013, and each June 1 through June 1, 2018, the use tax liability factor or use tax table percentage for the current calendar year shall be calculated by multiplying the percentage of income spent on taxable purchases for the preceding calendar year by 0.23, multiplying the product by the average state, local, and district sales and use tax rate, and then rounding the result to the nearest thousandth of a percent. On June 1, 2019, the use tax liability factor or use tax table percentage for the current calendar year shall be calculated by multiplying the percentage of income spent on taxable purchases for the preceding calendar year by 0.10, multiplying the product by the average state, local, and district sales and use tax rate, and then rounding the result to the nearest thousandth of a percent. On June 1, 2020, the use tax liability factor or use tax table percentage for the current calendar year shall be calculated by multiplying the percentage of income spent on taxable purchases for the preceding calendar year by 0.036, multiplying the product by the average state, local, and district sales and use tax rate, and then rounding the result to the nearest thousandth of a percent. On June 1, 2021, and each June 1 thereafter, the use tax liability factor or use tax table percentage for the current calendar year shall be calculated by multiplying the percentage of income spent on taxable purchases for the preceding calendar year by 0.03, multiplying the product by the average state, local, and district sales and use tax rate, and then rounding the result to the nearest thousandth of a percent.
(3) Total Personal Income. Total personal income shall be determined by reference to the most current personal income data published by the United States Bureau of Economic Analysis.
(4) Total Spending at Electronic Shopping and Mail Order Houses. Total spending at electronic shopping and mail order houses shall be determined by reference to the most current electronic shopping and mail order house spending data published by the United States Census Bureau.
(5) Total Spending on Taxable Purchases. Total spending on taxable purchases shall be determined by:
(A) Determining the percentage, rounded to the nearest tenth of a percent, of total spending at electronic shopping and mail order houses that are not included in the following categories of items, by reference to the most current retail trade product lines statistics by kind of business data published by the United States Census Bureau:
(i) Groceries and other foods for human consumption off premises, excluding bottled, canned, or packaged soft drinks;
(ii) Prescriptions;
(iii) Video Content Downloads;
(iv) Audio Content Downloads;
(v) Prepackaged computer software, including software downloads; and
(vi) All nonmerchandise receipts.
(B) Adding ten billion dollars ($10,000,000,000) to the total spending at electronic shopping and mail order houses to account for spending that is not included in the spending data published by the United States Census Bureau; and
(C) Multiplying the sum calculated in (B) by the percentage of total spending at electronic shopping and mail order houses that are not included in the categories of items listed in (A) above so that the result does not include spending on nontaxable purchases, and then rounding the result to the nearest tenth of a percent.
(6) Percentage of Income Spent on Taxable Purchases. The percentage of income spent on taxable purchases during a calendar year shall be calculated by dividing the total spending on taxable purchases for that year by the total personal income for that year, multiplying the result by 100, and rounding the result to the nearest tenth of a percent.
(7) Average State, Local, and District Sales and Use Tax Rate. The average state, local, and district sales and use tax rate for a calendar year shall be the total of:
(A) The rates of the statewide sales and use taxes imposed under article XIII of the California Constitution and the Sales and Use Tax Law (Rev. and Tax. Code, § 6001 et seq.) in effect on January 1 of that year;
(B) The statewide rate of local tax imposed under the Bradley-Burns Uniform Local Sales and Use Tax Law (Rev. and Tax. Code, § 7200 et seq.) in effect on January 1 of that year; and
(C) The weighted average rate of the district taxes imposed under the Transactions and Use Tax Law (Rev. and Tax Code, § 7251 et seq.) in effect in the various jurisdictions throughout the state on January 1 of that year after taking into account the proportion of the total statewide taxable transactions (by dollar) reported for each jurisdiction during the fourth quarter of the calendar year that is two years prior to the calendar year for which the calculation is made. For example, the total reported taxable transactions (by dollar) for the fourth quarter of 2010 shall be used to determine the weighted average rate of the district tax rates in effect on January 1, 2012, to calculate the weighted average rate of district taxes for calendar year 2012.
(c) Calculation of the Estimated Use Tax Liability.
(1) The estimated use tax liability for the AGI range described in subdivision (b)(1)(A) shall be determined by multiplying $5,000 by the use tax liability factor or use tax table percentage and then rounding the result to the nearest whole dollar.
(2) The estimated use tax liability for the AGI ranges described in subdivision (b)(1)(B) through (N) shall be determined by multiplying the midpoint of each AGI range by the use tax liability factor or use tax table percentage and then rounding the result to the nearest whole dollar.
(3) The estimated use tax liability for the AGI range described in subdivision (b)(1)(O) shall be determined by multiplying each range members actual AGI by the use tax liability factor or use tax table percentage and then rounding the result to the nearest whole dollar.
(d) Use Tax Table Format.
(1) The use tax table for calendar year 2011 shall provide as follows:
| Adjusted Gross Income (AGI) Range: | Use Tax Liability |
|---|---|
| Less Than $20,000 | $7 |
| $20,000 to $39,999 | $21 |
| $40,000 to $59,999 | $35 |
| $60,000 to $79,999 | $49 |
| $80,000 to $99,999 | $63 |
| $100,000 to $149,999 | $88 |
| $150,000 to $199,999 | $123 |
| More than $199,999 -Multiply AGI by 0.070% (.0007) |
(2) The use tax tables for calendar year 2012 and subsequent years shall utilize the same format as follows:
| Adjusted Gross Income (AGI) Range | Use Tax Liability |
|---|---|
| Less Than $10,000 | $ |
| $10,000 to $19,999 | $ |
| $20,000 to $29,999 | $ |
| $30,000 to $39,999 | $ |
| $40,000 to $49,999 | $ |
| $50,000 to $59,999 | $ |
| $60,000 to $69,999 | $ |
| $70,000 to $79,999 | $ |
| $80,000 to $89,999 | $ |
| $90,000 to $99,999 | $ |
| $100,000 to $124,999 | $ |
| $125,000 to $149,999 | $ |
| $150,000 to $174,999 | $ |
| $175,000 to $199,999 | $ |
| More than $199,999 -Multiply AGI by __% (.000__) | |
History—Adopted July 26, 2011, effective September 15, 2011.
Amended March 20, 2012, effective May 31, 2012. New subdivisions (a)(1), (a)(2) and (a)(3) were added. Subdivision (b)(1) was amended to increase the number of and modify the intervals of adjusted gross income ranges in the use tax tables. Subdivision (b)(2) was amended to substitute "June" for "May." New subdivision (b)(5) was added; renumbered remaining subdivisions. Newly designated subdivision (b)(6) was amended to replace "electronic and mail order" with "taxable." Subdivision (d)(2) was amended to provide the format of the use tax table for calendar year 2012 forward.
Amended April 24, 2013, effective July 1, 2013. In subdivsion (b)(2), deleted "and each June 1 thereafter," in the second sentence. Additionally, a sentence was added prescribing the manner in which the Board shall annually calculate the estimated amount of use tax due according to a person's adjusted gross income.
Amended March 25, 2015, effective July 1, 2015. In subdivision (b)(7)(A), deleted "section 35 of" from before "article."
Amended effective September 12, 2019. The amendments replaced "Board of Equalization (BOE)" with "California Department of Tax and Fee Administration (Department)" in subdivision (a)(1); replaced "BOE" with "Department" in subdivision (a)(2), (a)(2)(B), and (a)(3); added "dollars" to subdivision (a)(2)(A); deleted "the BOE shall calculate" from after "June 1, 2012," and added "shall be calculated" after "current calendar year" in the second sentence in subdivision (b)(2); replaced "thereafter" with "through June 1, 2018," deleted "the BOE shall calculate" from before "the use tax liability factor," and added "shall be calculated" after "current calendar year" in the third sentence in subdivision (b)(2); and added the fourth sentence to subdivision (b)(2).
Amended effective July 8, 2020. The amendments deleted "and each June 1 thereafter," from after "June 1, 2019," in the fourth sentence in subdivision (b)(2); and added the fifth sentence to subdivision (b)(2).
Amended effective July 13, 2021. The amendments deleted "and each June 1 thereafter," from after "June 1, 2020," in the fifth sentence in subdivision (b)(2); added the sixth sentence to subdivision (b)(2); and added Government Code sections 15570.22 and 15570.24 to the authority note.
Regulation 1686. Receipts for Tax Paid to Retailers.
Reference: Section 6202, Revenue and Taxation Code.
(a) In General. Each retailer required to collect use tax from purchasers (including lessees) must give a receipt to each purchaser (or lessee) for the amount of the tax collected. The receipt need not be in any particular form but must show the following:
(1) The name and place of business of the retailer.
(2) The serial number of the retailer's permit to engage in business as a seller or the retailer's Certificate of Registration—Use Tax.
(3) The name and address of the purchaser or lessee.
(4) A description identifying the property sold to the purchaser or leased to the lessee.
(5) The date on which the property was sold or leased.
(6) The sale price of the property, or, in the case of rentals, the amount of the rental for the period covered by the invoice.
(7) The amount of tax collected from the purchaser or lessee.
For sales transactions, and rental transactions with respect to which use tax applies, an invoice showing the data required above, together with evidence of payment of such invoice, will constitute a receipt.
(b) Notice to Lessee. For lease or rental transactions with respect to which use tax does not apply, the inapplicability of the tax must be indicated by a statement on the invoice that the tax does not apply for one of the following reasons:
(1) The property leased is of a kind (specify) the lease of which is excluded from the definition of "sale" and "purchase" by Sections 6006(g) and 6010(e), respectively, of the Sales and Use Tax Law.
(2) The property is being leased in substantially the same form as acquired by the lessor (or transferor) and the lessor (or transferor) acquired the property in a transaction that was a retail sale with respect to which the retailer reported and paid sales tax or as to which the lessor (or transferor) has paid use tax measured by the purchase price of the property.
(3) The property was acquired by the lessor in an exempt "occasional sale" and the lessor has paid, or elects to pay and will pay with his return for the period in which the property is first leased, use tax measured by the purchase price of the property in lieu of his rental charges.
(4) The amount of the rental payments is fixed by lease (or renewal thereof) prior to August 1, 1965, and the lessee does not have the unconditional right to terminate the lease upon notice.
History—Adopted August 7, 1957, as a restatement of previous ruling, effective September 11, 1957.
Amended and renumbered November 3, 1969, effective December 5, 1969.
Amended December 7, 1978, effective February 18, 1979. Amends subsection
(b)(2) which pertains to sales tax reimbursement and notice to lessees.
Regulation 1687. Information Returns.
Reference: Section 7055, Revenue and Taxation Code.
Information returns must be filed by all persons who solicit orders for the sale of tangible personal property the storage, use, or other consumption of which is subject to the tax if the seller does not hold a Certificate of Registration—Use Tax, unless the seller is engaged in business in this State and holds a seller's permit under the Sales and Use Tax Law. Such returns shall be for quarters of the calendar year and must be filed not later than the last day of the month following each three-month period ending in March, June, September and December. Such returns must show:
1. The name and address of each purchaser from whom an order was taken.
2. The description and sales price of the tangible personal property sold or to be sold pursuant to such order.
3. The date upon which the order is taken.
4. The date as nearly as can be determined at which the tangible personal property is to be delivered to the purchaser.
As used in this Regulation, the term "Certificate of Registration—Use Tax" shall include Certificates of Authority to Collect Use Tax issued prior to September 11, 1957.
History—Adopted August 7, 1957, as restatement of previous rulings, effective September 11, 1957.
Amended and renumbered August 5, 1969, effective September 6, 1969.