California LLC for E-Commerce — Sales Tax & Formation

California has the highest base state sales tax (7.25%) in the US, plus local additions up to 10.75%. E-commerce sellers in California must navigate complex district-based tax rates and marketplace facilitator rules. See our CA LLC guide.

Sales Tax for CA E-Commerce

• Rate: 7.25% state base + up to 3.5% local/district = 7.25%-10.75%
• Destination-based: Tax rate based on delivery address
• Marketplace facilitator: Amazon, Etsy, Walmart collect/remit for marketplace sales
• Direct sales: You collect and remit on your own website sales to CA customers
• Register with CDTFA for seller's permit before first taxable sale (free)

Clothing exemption? NO.

Unlike New York (clothing under $110 exempt), California taxes ALL clothing at full rate. No clothing exemption exists in CA.

SaaS/Digital Products

• SaaS: NOT taxable in California (treated as a service)
• Downloaded software: Partially taxable (pre-written software if "delivered electronically" — complex area)
• Digital goods (music, ebooks, games): Generally NOT taxable

FAQ

Does the LLC fee apply to gross revenue including COGS?

Yes. "Total income" for the LLC fee is essentially gross revenue (not reduced by COGS or expenses). A $500K-revenue e-commerce business with $400K in COGS and only $100K profit still owes the $2,500 LLC fee.

Should I elect S-corp to avoid the LLC fee?

If gross income exceeds $250K and net profit exceeds $80K: yes. The S-corp election eliminates the LLC fee while also saving federal self-employment tax.