California Sales Tax Nexus

1) Economic Nexus (Remote Seller Threshold)

California’s economic nexus rule is simple: if your sales of tangible personal property delivered into California exceed $500,000 in the current or prior calendar year, you are generally required to register with CDTFA and collect California tax from your customers. (CDTFA)

A couple important notes:

• California’s remote seller rule is often described as a use tax collection requirement, but in practice you will usually register and file sales and use tax returns and collect the applicable state, local, and district taxes based on where your customer receives the product. (CDTFA)
• California does not use a “200 transactions” test like some states. It’s a dollar threshold only. (BDO)

2) Physical Nexus

You can create California nexus even if you do not hit the $500,000 threshold. Common physical nexus triggers include:

• Having inventory stored in California (including inventory stored at a 3PL or fulfillment center)
• Having an office, warehouse, or retail location
• Having employees or contractors working in California (sales, service, installation, repairs, etc.)
• Certain in-state activities, like attending trade shows or doing work in the state

If you have any physical presence questions, it’s worth checking, because physical nexus can start even with modest activity.

Marketplace Facilitator and Marketplace Seller Rules (Amazon, Etsy, Walmart, etc.)

If you sell through a marketplace, California’s rules can get confusing.

Here’s the key idea: marketplace-facilitated sales still count when measuring the $500,000 economic nexus threshold. CDTFA specifically says you must include all sales for delivery into California, including sales facilitated through a marketplace. (CDTFA)

In many cases, the marketplace facilitator collects and remits tax on marketplace sales. Even so:

• Your marketplace sales can still push you over the $500,000 threshold. (CDTFA)
• If you also sell directly (Shopify, your website, invoices, phone orders), you may still need to register and collect on those direct sales once you have nexus.

California Rates and District Taxes (Why the “rate” depends on the address)

California’s statewide base rate is 7.25%, and many locations add district taxes on top. District taxes vary by location, and some areas have multiple district taxes stacked together. That’s why rates can be as high as 10.75% depending on the delivery address. (CDTFA)

California Income and Franchise Tax Nexus (Different rules than sales tax)

Sales tax nexus and income/franchise tax nexus are not the same thing.

For California income/franchise tax purposes, the Franchise Tax Board (FTB) generally considers you “doing business” in California if you are organized or domiciled in California, or if your California sales, property, or payroll exceed FTB’s annual thresholds (these thresholds are indexed and change over time). (State of California Franchise Tax Board)

For example, FTB’s published thresholds for 2025 include:

• California sales: $757,070 (or 25% of total sales, whichever is less)
• California property/payroll: $75,707 (or 25% of total, whichever is less) (State of California Franchise Tax Board)

Public Law 86-272 (Important limitation)

Public Law 86-272 is a federal rule that can limit a state’s ability to impose income tax in certain situations when a business’s in-state activity is limited to soliciting orders for tangible personal property (with orders approved and shipped from out of state). It does not protect you from California sales and use tax rules.

Because the details matter a lot, it’s smart to get advice before relying on this.

Get a Free Consultation

California nexus issues are high-stakes, and the right answer depends on your facts: where your inventory sits, how you sell, your sales channels, and what you do inside the state.

Call us at 720.878.2280 and we’ll help you determine whether you have nexus and what your next steps should be.