If you sell products to customers in California, you may be required to collect and remit tax even if your business is located outside the state.
California’s economic nexus threshold is more than $500,000 in sales of tangible personal property delivered into California during the current or previous calendar year. There is no separate transaction threshold.
California Economic Nexus at a Glance
| Rule | California Rule |
| Economic nexus threshold | More than $500,000 |
| Measurement period | Current or previous calendar year |
| Transaction threshold | None |
| Marketplace sales included in seller’s threshold? | Yes |
| Marketplace facilitator rules | Yes |
| Tax authority | California Department of Tax and Fee Administration (CDTFA) |
What Is Economic Nexus in California?
Economic nexus allows California to require an out-of-state business to collect and remit tax based on its level of sales into the state, even if it doesn’t have a physical presence there.
California’s economic nexus requirements took effect in 2019 following the South Dakota v. Wayfair decision.
For remote sellers, the key figure to monitor is $500,000 in sales of tangible personal property delivered into California.
What Is the Economic Nexus Threshold in California?
A remote seller generally establishes economic nexus when its total combined sales of tangible personal property delivered into California exceed $500,000 during the current or previous calendar year.
California does not have a separate transaction-count threshold.
The $500,000 threshold is considerably higher than the $100,000 threshold used by many other states.
What Sales Count Toward California’s $500,000 Threshold?
California looks at total combined sales of tangible personal property delivered into the state. Importantly, the calculation includes taxable and exempt sales, such as sales for resale.
Marketplace sales also count when determining whether the $500,000 threshold has been exceeded. Businesses selling through multiple channels should therefore monitor their total California sales, rather than looking only at sales made through their own website.
Do Amazon Sales Count Toward California Economic Nexus?
Yes, sales made through marketplace facilitators such as Amazon generally count toward California’s $500,000 economic nexus threshold. However, the marketplace facilitator is generally responsible for collecting and remitting the tax on the sales it facilitates.
For example, if you have $400,000 of Amazon sales and $150,000 of Shopify sales into California, your combined sales of $550,000 would exceed the economic nexus threshold.
You would therefore generally need to register and collect the applicable tax on your direct Shopify sales, while Amazon continues to handle the tax on its marketplace transactions.
If all of your California sales are made through a registered marketplace facilitator, you generally aren’t required to register as a retailer with the CDTFA solely because those sales exceed $500,000.
Can You Have California Nexus Below $500,000?
Yes, physical presence can create California sales tax nexus regardless of whether you reach the economic nexus threshold.
Physical presence can include:
- Inventory stored in California
- A warehouse or other business location
- Employees or sales representatives
- Certain property or equipment in the state
This is particularly important for Amazon FBA sellers. CDTFA states that marketplace sellers storing tangible personal property at a California fulfilment center are engaged in business in the state, regardless of their sales volume.
How Does California Sales Tax Work?
California has a statewide base sales and use tax rate of 7.25%, but additional district taxes can increase the rate depending on location.
Remote sellers that exceed the $500,000 threshold are generally considered engaged in business in every California district and must collect the applicable district use tax on taxable sales delivered there. This means the amount collected can vary depending on the customer’s delivery address.
What Should You Do After Crossing the California Nexus Threshold?
If your California sales exceed $500,000:
- Confirm when you crossed the threshold.
- Separate marketplace and direct sales.
- Check whether you already have physical nexus.
- Register with the CDTFA if required.
- Configure your ecommerce platform to collect the appropriate tax.
- Begin filing and remitting as required.
Businesses should monitor California sales throughout the year rather than waiting until year-end to check whether the threshold has been exceeded.
California Economic Nexus Examples
Shopify seller:
A remote business has $550,000 of direct Shopify sales delivered into California. It exceeds the economic nexus threshold and should register with the CDTFA.
Amazon-only seller:
A business has $750,000 of California sales entirely through a registered marketplace facilitator. The sales count toward the economic nexus threshold, but an Amazon-only marketplace seller generally isn’t required to register solely because of those facilitated sales.
Amazon and Shopify seller:
A business has $400,000 of Amazon sales and $150,000 of direct Shopify sales into California. Its combined $550,000 exceeds the threshold, meaning it generally needs to register and collect tax on its direct sales.
What If You Should Have Registered Previously?
If you exceeded California’s economic nexus threshold in a previous period but didn’t register, you could have outstanding tax liabilities, together with applicable penalties and interest.
Depending on your circumstances, California’s Voluntary Disclosure Program may provide a way to resolve historical liabilities, potentially with benefits including a limited lookback period and penalty relief.
It’s important to investigate your options before being contacted by the CDTFA.
FAQs
What is the economic nexus threshold in California?
California’s economic nexus threshold is generally more than $500,000 in sales of tangible personal property delivered into California during the current or previous calendar year.
Does California have a transaction threshold?
No, California does not have a separate transaction-count economic nexus threshold.
Do Amazon sales count toward California’s economic nexus threshold?
Yes, marketplace sales generally count toward the $500,000 threshold, although the marketplace facilitator is responsible for collecting and remitting tax on the sales it facilitates.
Can I have California nexus without reaching $500,000?
Yes, physical presence, including inventory stored in California, can create nexus regardless of your sales volume.
What is California’s sales tax rate?
California’s state-wide base sales and use tax rate is 7.25%, but local district taxes can result in a higher combined rate depending on the customer’s location.
Final Thoughts
California has a relatively high $500,000 economic nexus threshold, but businesses need to remember that marketplace sales count when determining whether that threshold has been exceeded.
Remote sellers should monitor their total California sales while also considering physical presence, particularly inventory stored in California fulfilment centers. Businesses selling through a combination of Amazon, Shopify and other channels should understand which sales count toward nexus and who is responsible for collecting the tax.
RJM Tax Exemption can help you determine whether you have nexus in California and assist with sales tax registration, filing and Voluntary Disclosure Agreements where required.
Last updated: August 2026. Sales tax rules can change. Always check current California Department of Tax and Fee Administration guidance when determining your obligations.
