If our startup is incorporated in Delaware and our server (cloud hosting) is in California, does this create a tax nexus in California?

 

According to California revenue and tax code, you are considered doing business in California if you are actively engaged in transactions with a profit objective or financial gain.

While there are many conditions to qualify under this, I am highlighting few which may be more relevant to your business :

1. Your business is domiciled in California.
2. Sales in CA exceed the lesser of $500,000 or 25% of total sales.
3. Real and tangible property in CA exceed lesser of $50,000 or 25% of total tangible and real business property.

So, your situation may require some additional research.

Secondly, one important point. Most counties in CA have business personal property tax and you are required to file reports & pay tax if your assessed business personal property is in excess of $100,000. Usually, the tax is around 1–1.1% of assessed value. So, for $20,000 your tax may be in the range of $200-$220.

 

** Our response to a question we answered on quora.

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Posted In: Tax

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