The California Department of Tax and Fee Administration identifies unregistered sellers by analyzing revenue data, marketplace reporting, federal tax filings, and cross state information sharing.
Businesses may be flagged when:
- Sales exceed the economic nexus threshold
- No seller permit is on file
- Marketplace data does not match filings
- Federal gross receipts exceed reported California sales
Unregistered sellers with nexus exposure may face audit assessments and penalties.
Run Your Nexus Risk CheckMarketplace Reporting and Data Matching
California receives transaction level information from marketplace facilitators and payment processors.
The CDTFA may compare:
- Marketplace reported revenue
- Seller permit registrations
- Filed sales tax returns
If revenue exceeds thresholds and no registration exists, enforcement may follow.
Federal Tax Return Comparisons
California may compare:
- Federal gross receipts
- Industry benchmarks
- Reported California sales
If federal income tax filings show significant revenue but no California registration exists, risk increases.
California Sales Tax Audit Risk
Cross State Data Sharing
States share information related to:
- Multi state sellers
- Prior audit findings
- Nexus determinations
If another state identifies nexus, California may evaluate whether similar exposure exists.
What Happens After You Are Flagged
Once identified, the CDTFA may:
- Send inquiry letters
- Request registration
- Initiate an audit
- Assess back taxes and penalties
If nexus existed before contact, voluntary disclosure options may become limited.
- California Back Sales Tax Liability
- California Voluntary Disclosure Agreement
- What triggers a sales tax audit in California
How to Reduce Enforcement Risk
Businesses can reduce enforcement exposure by:
- Determining whether nexus exists
- Evaluating when nexus began
- Addressing unregistered periods proactively
Acting before receiving state contact generally preserves more flexibility.
Concerned About California Enforcement Risk
If your business may have exceeded the California economic nexus threshold without registering, evaluate exposure before receiving contact.
Run Your Nexus Risk CheckIdentify potential nexus exposure before enforcement escalates.
CDTFA Enforcement FAQ
How does California know if I exceeded the nexus threshold?
California uses marketplace reporting, payment processor data, and federal tax comparisons.
Will California audit remote sellers?
Remote sellers that exceed the economic nexus threshold without registration may face inquiry or audit.
Can I fix exposure before being contacted?
Yes. Addressing nexus exposure proactively may reduce penalties and audit scope.
