Are you engaged in Internet sales in California? In light of changes to sales and use tax that became effective in April, some retailers may not be certain if they must collect and pay over sales and use tax based on aspects of their businesses. The CA Dept. of Tax and Fee Administration has updated Publication 109 (Internet Sales) to add clarity on many issues. One key change is the addition of details that defines what “engaged in business” in CA means and doesn’t mean. For example, “Offering merchandise for sale over the phone, by mail order, or online will generally not, by itself, cause a retailer to be engaged in business in CA.” Go to https://bit.ly/2OClJka and scroll down. If you have questions or would like more info, please contact your Linkenheimer CPA.
When you retire, you may consider moving to another state — say, for the weather or to be closer to your loved ones. Don’t forget to factor state and local taxes into the equation. Establishing residency for state tax purposes may be more complicated than it initially appears to be.
Identify all applicable taxes
It may seem like a no-brainer to simply move to a state with no personal income tax. But, to make a good decision, you must consider all taxes that can potentially apply to a state resident. In addition to income taxes, these may include property taxes, sales taxes and estate taxes.
If the states you’re considering have an income tax, look at what types of income they tax. Some states, for example, don’t tax wages but do tax interest and dividends. And some states offer tax breaks for pension payments, retirement plan distributions and Social Security payments.
Watch out for state estate tax
The federal estate tax currently doesn’t apply to many people. For 2019, the federal estate tax exemption is $11.4 million ($22.8 million for a married couple). But some states levy estate tax with a much lower exemption and […]
What is Use Tax?
California’s sales tax generally applies to the sale of merchandise, including vehicles, in the state. California’s use tax on the other hand applies to the use, storage, or other consumption of those same kinds of items in the state. Generally, if sales tax would apply when you buy physical merchandise in California, use tax applies when you make a similar purchase without tax from a business located outside the state. For these purchases, the buyer is required to pay use tax separately. The sales and use tax rate in a specific California location has three parts: the state tax rate, the local tax rate, and any district tax rate that may be in effect.
What’s the Difference Between Sales Tax vs Use Tax?
Tax collected by the retailer here in California is called sales tax, and the retailer is responsible for reporting and paying the tax to the state. When an out-of-state or online retailer doesn’t collect the tax for an item delivered to California, the purchaser may owe “use tax,” which is simply a tax on the use, storage, or consumption of personal property in California.
Items to Report Directly to CDTFA
Report use […]
You’ve probably heard about the recent U.S. Supreme Court decision allowing state and local governments to impose sales taxes on more out-of-state online sales. The ruling in South Dakota v. Wayfair, Inc. is welcome news for brick-and-mortar retailers, who felt previous rulings gave an unfair advantage to their online competitors. And state and local governments are pleased to potentially be able to collect more sales tax.
But for businesses with out-of-state online sales that haven’t had to collect sales tax from out-of-state customers in the past, the decision brings many questions and concerns.
What the requirements used to be
Even before Wayfair, a state could require an out-of-state business to collect sales tax from its residents on online sales if the business had a “substantial nexus” — or connection — with the state. The nexus requirement is part of the Commerce Clause of the U.S. Constitution.
Previous Supreme Court rulings had […]