If you’re selling digital services and products to customers in California, then you might be liable for California’s sales tax. This guide covers two very important parts of the system:
- Registering for the tax, and then
- Filing tax returns on time.
We’ve scoured the California Department of Tax and Fee Administration (CDTFA) website to provide you with all the necessary information about sales tax for businesses in one place.
How to register for sales tax in California
Remote sellers register for sales tax in California according to where you are based.
US businesses can register via Online Services, an online tax portal. The system is available in English and Spanish. This portal is also where you’ll file and pay your tax returns. More on that later!
The first step is to register your business for a seller’s permit. Then you’ll need to create an Online Services account.
Be prepared to share the following information:
- Your social security number (corporate officers excluded)
- Your date of birth
- Your driver license number, state ID number, or other ID (e.g., passport, military ID)
- Names and location of banks where you have an account
- Names and addresses of suppliers
- Name and address of bookkeeper or accountant
- Name and address of personal references
- Expected average monthly sales and the amount of those sales which are taxable
- Your email address
- If you’ve purchased an existing business, you must also provide the previous permit information
Register for a seller’s permit
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Go to the Online Services website and below the different login options, click “Register a New Business Activity.”
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You’ll be taken to a questionnaire that will start building a profile of your business. Your answer to the first question is (most likely) the very first option.
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Next there’s a series of questions about whether you sell very specific types of products or materials, such as fuel, car tires, or batteries. Click “No” to all and continue until you need to select your business type.
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On the next page, you’ll enter identification data. You must enter two types, a primary and a secondary form of identification, but you have some choice in the matter. For the primary ID, you can choose between your individual taxpayer number and your social security number:
For the second form of ID, you can choose from the following options:
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Click through the next few questions, all very straightforward, and confirm that you are applying for a seller’s permit. That’s the end of the questionnaire! Now you move on to filling the application.
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Start with personal information about where you live, followed by other contact information.
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You’ll need to upload a digital copy of your ID. To do so, click the button “Add” on the right side of the screen. You can label this as a “Supplemental Document.”
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Now you’ll submit some business information. California asks right away about payments and e-commerce activity.
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Answer the remaining questions about your business, and click Submit!
After your application is reviewed and approved, you should receive a seller’s permit and registration certificate. You’ll also receive a security code in the mail that will enable you to create an online tax account.
The website doesn’t state how long you should expect to wait, but if you have any questions, you can email the tax office for out-of-state sellers at OSReg@cdtfa.ca.gov.
Once registered, you’ll be assigned a tax filing frequency: monthly, quarterly, or yearly.
Create an Online Services account
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Go to the Online Services website and among the different login options, click “Sign Up Now.”
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The system will ask you a few questions about your relationship to the business and the security code you received in the mail.
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Complete the sign-up process and confirm your email address, if prompted.
How to file sales tax returns in California
Sales and taxes should be reported and filed using US dollars. If you’ve made any transactions in California in a different currency, be sure to convert those to USD using official currency exchange rates.
When to file and pay
You must file a sales tax return either monthly, quarterly, or yearly. The deadlines are as follows:
Monthly
For monthly filers, reports are due on the last day of the month following the reporting month. For example, the July sales tax report is due August 31.
Quarterly
For quarterly filers, reports are due on the last day of the month following the reporting period.
- April 30, for first quarter ending March 31
- July 31, for second quarter ending June 30
- October 31, for third quarter ending September 30
- January 31, for fourth quarter ending December 31
Yearly
For yearly filers, reports for the previous year are due on January 31.
Note: Didn’t make any sales in Texas during your reporting period? You should still report that. This is often called a “zero return” and it follows the exact same process as a normal return. (Just a little less data entry 😉)
How to file
Before you get started, you should collect all the information about your taxable sales in California during the previous quarter. The tax website suggests having these pieces ready:
- total sales and income
- total purchases and expenses
You can file your return in Online Services. You can log in here.
How to pay
Tax payments must be in US dollars, and can be made directly at the time of filing.
Payment options include:
- Direct transfer from your bank account
- Credit card (with a 2.3% processing fee)
- Check
- Money order.
Some high-grossing businesses might be required to pay by electronic funds transfer (EFT).
If you have further questions about your payment options, head to CDTFA’s payment info page.
What to do in between registering and filing?
Well, you must comply with all the rules for California sales tax! That means charging 7.25% sales tax and watching out for local level taxes, among other things.
For further reading that will help you stay compliant and successful as a remote seller, check out our Business Guide to Sales Tax in California.
Note: At Quaderno we love providing helpful information and best practices about taxes, but we are not certified tax advisors. For further help, or if you are ever in doubt, please consult a professional tax advisor or the tax authorities.