Is California technologically equipped to handle all those electronic transactions? The California Department of Tax and Fee Administration (CDTFA) says the answer is yes.
The agency's announcement Wednesday of the change came as a result of a U.S. Supreme Court ruling last summer in a case called South Dakota vs. Wayfair. In essence, it said that an out-of-state retailer selling tangible goods for delivery into a state through the Internet, mail-order catalogs, telephone or any other means must collect sales tax and send it to that state.
With California having the fifth- or sixth-largest economy in the world and many residents having relatively high levels of disposable income, we buy a lot of goods from out of state. Considering that California has the highest state sales tax rate in the nation, 7.25 percent, that's a lot of revenue.
But CDTFA Director Nick Maduros, quoted by Digital Commerce 360, noted: “Today’s announcement does not increase or create any tax. Rather, California will now require more out-of-state retailers to collect and remit taxes, just as brick-and-mortar retailers have done for decades.”
And CDTFA says it isn’t worried about its ability to process the crush of new transactions.
Techwire asked the agency whether all those additional transactions would require expanding its IT system and staff.
“While we expect that Wayfair may lead to thousands of additional taxpayers and increased revenues of $1-2 billion on top of the $57 billion we collected last fiscal year, any increase in registrations can be handled by our current system,” the department told Techwire in a statement Thursday.
“As with any major change,” the statement continued, “should the need arise we will assess the data and make necessary adjustments to continue our commitment and support for all Californians.”
The agency issued a Special Notice online, outlining specifics of the state's tax plan and offering guidance to those affected by the new levy.
CDTFA was already in the news this week, with the announcement by CIO Nabil Fares that he’ll be retiring from state service at the end of the year. His successor has not been named.
