California is the largest e-commerce market in the US — but it's also the most expensive state to operate in. Here's why most FBA sellers should seriously consider Delaware instead.
Sales Tax: California's Biggest Problem
California has a base state sales tax rate of 7.25% — but many counties and cities add additional taxes, pushing the effective rate to 10.25% or higher in places like Los Angeles and San Francisco.
Nexus Risk
Operating a warehouse in California creates "economic nexus" — meaning you may be obligated to collect and remit sales tax to California from any customer in the state, regardless of where you're physically located. This creates significant compliance obligations and risk.
Cost Comparison: $300K Inventory Annually
- California (7.25% rate): $21,750 in sales tax
- Delaware (0%): $0
- Annual savings with Delaware: $21,750
Labor and Real Estate Costs
California's minimum wage is $16+ per hour and warehouse real estate in Southern California exceeds $25/sq ft annually. Delaware warehouse costs run 40-60% lower.
The Realistic Trade-Off
The main advantage California offers is proximity to the Port of Los Angeles (for China imports) and the large local population. But with Amazon's nationwide fulfillment network, being in Delaware still gets you 2-3 day delivery across the entire US.
💡 For most FBA sellers sourcing from China: ship to our Claymont, Delaware address, not California. You'll save tens of thousands annually with no meaningful logistics disadvantage.
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