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SaaS is non-taxable in California since there is no transfer of tangible personal property. (Source)

There is no cost to apply for a permit. However, there may be a security deposit if you have unpaid taxes if the business closes. The amount of this deposit will be determined at the time you apply. Other business registration fees may apply.

A business owes use tax on any purchase made to a retailer outside the state where the seller did not collect California sales or use tax (the use tax rate is currently 7.5%) and the item was used, given away, stored or consumed in California. For more details, consult the California CDTFA’s website.

If you’ve discovered you have sales tax nexus in California, your next step is to determine if what you’re selling is taxable.

Services in California are generally not taxable. However, if the service you provide includes creating or manufacturing a physical item, you may have to deal with the sales tax on products.

Tangible products are taxable in California, with a few exceptions. These exceptions include certain groceries, prescription medicine and medical devices. See California CDTFA publication 61 for a list of items that are exempt from California sales tax.

Effective April 26, 2019, California considers retailers who exceed $500,000 in taxable annual sales to have an economic nexus. This means the state considers these sellers now obligated to collect sales tax from buyers in that state. You can read California’s economic nexus guides for sellers here.

In California, every retailer engaged in business has a physical nexus which includes but is not limited to having:

1. A physical location – This includes an office, place of distribution, sale or sample room or place, warehouse or storage place, or other place of business.
2. A person working for you – This includes a representative, agent, salesperson, canvasser, independent contractor, or solicitor operating in this state under the authority of the retailer or its subsidiary for the purpose of selling, delivering, installing, assembling, or the taking of orders for any tangible personal property.
3. An affiliate – Also called “click through” nexus, this includes “a person or persons in this state, for a commission or other consideration, directly or indirectly refer potential purchasers of tangible personal property to the retailer, whether by an Internet-based link or an Internet Web site, or otherwise.” Nexus occurs when sales from affiliates exceed $10,000 in the preceding 12 months AND total in-state sales exceed $1 million in the preceding 12 months.
4. Presence at a tradeshow – Making sales at a tradeshow may constitution a nexus, but if the retailer had a physical presence at a convention or trade show for 15 or fewer days in any 12-month period and did not derive more than $100,000 of net income from these activities in the prior calendar year, nexus would not have been established. However, sellers are still required to collect use tax from buyers at trade shows.

When you file and pay California sales tax depends on two things: your assigned filing frequency and your state’s due dates.

States assign you a filing frequency when you register for your sales tax permit. In California, you will be required to file and remit sales tax either monthly (in special cases), quarterly, semiannually or annually (calendar annual or fiscal annual).

California sales tax returns are always due on the last day of the month following the reporting period. If the filing due date falls on a weekend or holiday, sales tax is generally due the next business day.

Important to Note: California requires some high-volume sellers to file on a quarterly basis but make monthly sales tax prepayments. If this applies to you, you will have monthly prepayments due to California by the 24th of the month following every month in which you do not have a sales tax filing and payment due. See the California monthly prepayment due dates here.