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What creates a sales Tax Nexus In California?

California Sales Tax NexusHaving read the legislation it is not that clear. We are a Utah company and have one customer in California. We sell a one off large item which has a yearly warranty charge. What constitites physical presence. A sales man will go to California to negotiate the sale and after that our staff only travel to California if the item needs a repair or twice a year to upgrade the software. Can anyone advise?

Answers

Anonymous
(Financial Analyst) |

Having a sales man enter California and selling product constitutes Nexus. Particularly if you will be re-entering the state for repair or maintenance.

Anonymous
(Controller) |

You are allowed to enter the state a maximum # of times for sales purposes and/or to attend trade shows. If you don't have an employee or dedicated agent residing there and have no assets within the state it would be extremely difficult for the state to argue that you have nexus. As you state, the legislation is unclear. Based on your situation described above you have a very strong argument that you do not have nexus. In my experience you want to avoid nexus as the reporting requirements are cumbersome.

Michael O'Brien
Title: Principal Sales Engineer
Company: Intacct
(Principal Sales Engineer, Intacct) |

I think you are probably fine on the Salesperson. It is the services staff performing services in the State that is going to catch you under the Nexus rules. If you do ANY post sale work in the State, California will claim you have nexus and it will be very hard to prove you do not.

Michael O'Brien
Title: Principal Sales Engineer
Company: Intacct
(Principal Sales Engineer, Intacct) |

Google - Public Law 86-272 and you will find all the information you need to determine if you will have nexus issues.

Topic Expert
Regis Quirin
Title: Director of Finance
Company: Gibney Anthony & Flaherty LLP
LinkedIn Profile
(Director of Finance, Gibney Anthony & Flaherty LLP) |

According to the California State Board of Equalization (http://www.boe.ca.gov/sutax/outofstate.htm), “Circumstances where a retailer is considered to be engaged in business in California, commonly referred to as "nexus," for sales and use tax purposes include (but are not limited to) the following:

• Maintaining, occupying or using any type of office, sales room, warehouse or other place of business in California. This includes use that is temporary, indirect or through an agent or other representative.

• Having any kind of representative operating in the state for the purpose of taking orders, making sales or deliveries, installing, or assembling tangible personal property.

• Making repairs or providing maintenance or service to property sold, whether by employees, agents or other representatives.

• Driving rentals from a lease of tangible personal property located in California.”

Based on my quick read (points 2 and 3), you are subject to nexus.

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