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State Taxes in CA for Delaware LLC

Asked by: Faisal Muqeet  — 20 October, 2011

We want to form an LLC in DE with future plans to have office (physical) in CA. I know we have to apply for foreign qualification in CA once we have that office and pay $800 franchise tax as minimum and additional minimum tax @ 8.84% if revenue exceeds 250,000.

I need to know whether this additional tax will be on CA sourced income i.e sales from CA customers or all the sales made by our CA office which will include other states as well.

Fyi..we have plans to make internet sales all over the US

Answered by: admin  — 20 October, 2011


The sales tax of a given state applies to those buyers who reside in that state (based on where the product is going to be delivered). So for example if your California-based business makes a sale to a Michigan resident and the product is being shipped from Kentucky then you will not collect any sales tax on that transaction. If on the other hand the sale is in California then you need to collect the California sales tax.

Keep in mind though, that technically if your product ships from any state (in this example Kentucky) you need to collect sales tax on that transaction, as by shipping from that state you create what is called a “nexus”. For that purpose you would need to register with an appropriate state agency to collect sales tax on transactions in that state.

Finally, five state don’t have sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon.

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