California Sales Tax Relief Available for those who Received the CDTFA Letter
California sales tax owed represents the largest liability for Amazon FBA sellers who had stock in California prior to October 1st, 2019 and are not registered.
[Updated October 2019] After speaking with California, don’t expect any past liability to go away anytime soon. You missed the September 25th deadline but you may still have options to reduce some interest or penalties if you come forward for compliance.
[Update August 30, 2019 ]: The deadline is September 25th, 2019, to get registered in California, file your past sales tax returns, from April 2016 to March 2018, pay the past sales tax, plus a penalty. There is an option to enter into a payment program by that date also, but the payment plan must be completed by December 2021.
The deadline to register for the CDTFA‑38‑A is September 25, 2019. That means you MUST get registered for sales tax in California, file your past sales tax returns, from April 2016 to March 2018, AND pay the past sales tax, plus a penalty (ALL by the 25th). There is an option to enter a payment program by that date also, but the payment plan must be completed by December 2021 (keep in mind you still must be registered by the 25th with all past sales tax returns ready).
What happens to those who miss the September 25th deadline?
The representative from California said, “Sellers would lose this short lookback period of only 3 years and now be subject to a lookback period of 8 years.”
That means if someone was selling on Amazon with FBA stock in California for 7 years and never registered with this program, they would only be a liability for the periods of April 2016 to March 2018.
BUT if they miss this deadline, they would be responsible for all 7 years (assuming they had stock in California at that time). This is why you will read on social media comments about how California will bankrupt sellers who do not come forward with compliance that have been selling for more than 4+ years.
Amazon FBA sellers are liable for when they first had nexus (FBA stock in California) and sales after that time period (typically the same month).
As of October 1st, 2019, Amazon, as a marketplace facilitator will be collecting and remitting sales tax on behalf of all third-party sellers.
If you were not in compliance with California sales tax you may have recently received an email from California with this subject:
From: “CA Department of Tax and Fee Administration” <[email protected]> Subject: Relief May Be Available to Marketplace Sellers Using Fulfillment Centers in California
If you received this email, it means two things: California has your email, most likely from Amazon, and it is recommended you take action on this notification.
If you have not yet registered in California, you may have received a recent notice from the CDTFA about an opportunity to seek relief for sales between April 1, 2016, to March 31st, 2019.
In addition to registration within 90 days you must also meet these requirements:
- A seller can not have registered prior to 12-1-18;
- Sales and use tax returns can not have been filed prior to receiving a letter from the CDTFA;
- The seller only had nexus due to inventory in an Amazon warehouse.
Key Point: Even if you received a past notice from California last December or after, you still may qualify for this “last opportunity” for compliance with California.
Your next step is to complete CDTFA‑38‑A (via a paper form) after you register for sales tax permit. Sales Tax System is able to help you with this step.
Once your application for CDTFA‑38‑A (Relief for Marketplace Sellers) has been approved by the state, you will file annual returns for the years 2016-2018. Also, it will relieve the past penalties; however, you would still have to pay the taxes and interest for years 2016-2018.
A “qualifying retailer” will not be assessed tax by the CDTFA with respect to sales made prior to April 1, 2016, and will be relieved of penalties with respect to sales made for the period April 1, 2016, to March 31, 2019.
How do I register to pay past California sales tax?
To register, go to www.cdtfa.ca.gov, select Register, then select Register a New Business Activity or Location. The start date on your account should reflect the date you began engaging in business in California.
Tips on Processing Time
If you meet all of the conditions as a qualifying retailer, first, you need to register for sales tax. Then you can register for CDTFA-38-A (Relief for Marketplace Sellers) immediately after since it will ask for your account number. No supporting documents needed, just completely fill out the form. Once CDTFA receives the application, it will take 2-4 weeks for processing. They will also send a notification if it has been approved (via mail and email). On a final point, your application must be mailed within thirty (30) days of registration to California Department of Tax and Fee Administration.
How do I notify the CDTFA that I am a qualifying retailer?
If you are a “qualifying retailer,” please complete CDTFA‑38‑A, Relief for Marketplace Sellers per section 6487.07, available at www.cdtfa.ca.gov and mail the form to:
California Department of Tax and Fee Administration
3321 Power Inn Road, Suite 130
Sacramento, CA 95826‑3893
For more information about California Sales Tax
For more information about registering, filing returns, paying taxes, or entering into a qualifying installment payment agreement, and relief of penalties, please contact their Out‑of‑State Office at 1‑916‑227‑6600, or via email at [email protected]I.
Questions? Please email [email protected].