Here’s how it works for sales tax: It used to be that a business had to have a physical presence in a state to be taxed there. Last June, the US Supreme Court held in South Dakota v. Wayfair that states can tax goods and services provided that they were sold to or rendered to residents of the state, regardless of where the seller was.
California Tax as an Example
California’s sales tax rate is 7.25%. So if you are located in California and sell to residents there, you pay the tax. If you are not located in California but sell to residents there, then under new legislation kicking in on April 1, you pay California sales tax after you reach a threshold amount of sales to California residents, either $100,000 in sales or 200 transactions, whichever you reach first. So depending on how much you sell and to how many purchasers you have, there is some advantage to headquartering in a state other than California.
What About Tax in Delaware?
Delaware has no corporate income tax. California has a corporate income tax rate of 8.84%. So advantage to Delaware here.
And Then There is Wyoming
There’s long been a competition to be the best state in which to incorporate. For a while it was Nevada. Now the favorite is Wyoming. Wyoming has no corporate income tax and a sales tax of 4%. But everyone in the corporate world is leery of new tax havens. Also, Delaware is the gold standard for corporations.
What to Do
Perhaps your customers expect you to have a California address, so for business reasons other than taxes, you might want to register to do business in California and have a physical address there.
Taxation clearly favors staying in Delaware and simply selling to California residents and collecting California sales taxes as necessary. But business reasons might make you want to have a physical address in California. If you decide that, you could register your Delaware corporation to do business in California.