Posted: March 24, 2011, 5:23 PM

Q: Do I have to collect sales tax in California if my company has a fulfillment center there?

My company will be adding an e-commerce component to sell printed photography. North American fulfillment will be shipped out of California. Does California tax code state that we will need to collect sales tax for products shipped to California addresses?

Asked by: David

A: Yes, that fulfillment center represents a physical presence in California. Sales tax must be collected.

E-commerce and sales tax can be a difficult issue for small business owners. The first question you must ask is whether your product is taxable. In most states, any actual goods sold online are taxable. Next, you must determine whether your company has a "nexus" in the state to which you are shipping. If you have a general presence or link to the state you ship to, then you will generally have to pay sales tax in that state. Your case is pretty simple. Your company has a link to California because that is where you are shipping your products from and most likely maintain a facility there. Therefore, since a "nexus" exists, you will have to pay sales tax for goods shipped to California addresses.

Michael R. Murphy

Member of the Brand Equity and Strategic Distribution Group, at law firm Nelson Mullins Riley & Scarborough LLP

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