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Regulatory Framework · California · Scope

Who is actually in scope for SB 253?

SB 253 uses two tests together, not one: a global revenue threshold and a separate doing-business-in-California test borrowed from state tax law. Most companies that receive an SB-253-related request fail at least one of these tests — which is exactly why the request lands on suppliers instead.

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Not in scope? Answer your customer anywayThe full SB 253 & SB 261 guide

Orientation only, current at the review date above. Thresholds are set in statute and refined by CARB rulemaking and change annually for the California-sales figure — this is not a scoping opinion or legal advice.

The short version
  • Test 1: total annual revenue above roughly $1 billion — global revenue, not just California revenue.
  • Test 2: “doing business in California” — a defined tax-law test, not just “has a customer in CA”.
  • Both tests must be met. Clearing the revenue bar alone does not put a company in scope.
  • The California-sales figure is inflation-adjusted every year — treat any number quoted here as illustrative for its stated year.
  • Most companies that receive a request fail at least one test — see what to do about it.

The two tests, together

SB 253 does not use a single yes/no line. A company is only in scope if it clears both of two independent tests: a revenue threshold, and a separate test for whether it is doing business in California at all. Meeting one without the other is not enough in either direction.

Test 1: the revenue threshold

SB 253 applies to entities with total annual revenue above roughly $1 billion — as commonly summarised; the precise statutory figure and how revenue is measured sit in the statute and CARB's rulemaking, so confirm the current figure against those sources before relying on it. This is global revenue, not revenue earned in California specifically. SB 253's companion law, SB 261, uses a separate and lower threshold of roughly $500 million — the two statutes are not interchangeable, and clearing one threshold says nothing about the other.

Test 2: doing business in California

This is the test most secondary summaries skip or oversimplify. CARB's initial regulation defines “doing business in California” by borrowing the definition used for California franchise tax purposes under Revenue & Taxation Code §23101 — specifically: being organized or commercially domiciled in California (§23101(a)), or meeting the sales-based economic-nexus test in §23101(b)(1)-(2). It deliberately excludes the property- and payroll-based nexus tests in §23101(b)(3)-(4), on the reasoning that property or payroll alone does not demonstrate enough economic connection to California to justify inclusion.

The sales-based test itself: a company's California sales must exceed the lesser of an inflation-adjusted dollar figure or 25% of its total sales. For 2025, that inflation-adjusted figure is $757,070. This number is recalculated annually under §23101(b) — it is not a fixed figure, and this page will age on exactly this point. Confirm the current year's amount with the California Franchise Tax Board or CARB before relying on it for a scoping decision.

Worked examples

$2B global manufacturer, $2M of annual sales into California

In scope for SB 253

Clears the ~$1B revenue threshold, and $2M in California sales exceeds the doing-business sales test easily.

$1.2B global company, no California sales, not incorporated in CA

Not in scope

Clears the revenue threshold but fails the doing-business-in-California test — both prongs are required.

$50M revenue California-based SME

Not in scope on revenue alone

Nowhere near the ~$1B threshold — but likely to receive a request anyway, from a customer that is in scope.

$900M global revenue, large California sales presence

Not in scope

Fails the revenue threshold regardless of California nexus — being under roughly $1 billion in total revenue exempts a company even with heavy California business.

These are illustrative, not a scoping determination for any real company — the exact figures depend on the current-year thresholds and on how revenue and sales are measured under CARB's final rules.

If you're not in scope, why did you get a questionnaire anyway

Because the request isn't about your scope — it's about your customer's. An in-scope company has to report its own Scope 3 value-chain emissions eventually, and the only way to get that figure is to ask the businesses it buys from, regardless of whether any individual supplier itself clears either SB 253 test. See SB 253 for suppliers for exactly what to send back.

Common questions

Total global annual revenue, not California-only revenue. A company can meet SB 253's revenue threshold with minimal California sales — it is the separate doing-business-in-California test that then decides whether that revenue is enough to bring the company into scope.

It's not "has a customer in California" — CARB's initial regulation borrows the definition used for California franchise tax purposes (Revenue & Taxation Code §23101), specifically the organized-or-domiciled-in-California prong and the sales-based economic-nexus prong. It deliberately excludes the property- and payroll-based nexus tests from that same tax code section, on the reasoning that property or payroll alone doesn't show enough economic connection to California to justify SB 253 coverage.

Yes. It is inflation-adjusted annually under the tax code provision CARB's regulation borrows from. Any specific dollar figure quoted here or elsewhere ages — confirm the current year's number with the California Franchise Tax Board or CARB before relying on it for a scoping decision.

Because your customer's obligation, not yours, drives the request. An in-scope company eventually has to report Scope 3 — its value-chain emissions — and the only way to get that figure is to ask its suppliers directly, regardless of whether any individual supplier is itself in scope. See our guide for suppliers on what to actually send back.

No. SB 253 (the emissions-disclosure law) uses a revenue threshold of roughly $1 billion; SB 261 (the climate-financial-risk law) uses a lower threshold of roughly $500 million. Both statutes apply the same doing-business-in-California test alongside their respective revenue figures.

Most SME users of EcoDiligence are exactly in this position — not in scope of SB 253 themselves, but asked for data by a customer that is. A Passport produces the Scope 1 and Scope 2 figures that answer that request, self-reported and clearly marked as not independently assured.

Reviewed on September 7, 2026. Thresholds are set in statute and refined by CARB rulemaking; the California-sales dollar figure is inflation-adjusted annually and the figure quoted here is the 2025 amount only. This page is orientation, not legal advice — confirm current thresholds and their exact statutory definitions with CARB or a qualified adviser before relying on them for a scoping decision.

EcoDiligence ESG Passports are self-reported summaries structured for ESG disclosure workflows. Content is not independently assured. Information aligned with EFRAG VSME and IFRS S2 (ISSB) frameworks does not constitute formal compliance or certification.

Not in scope yourself? Answer the request anyway

Generate a shareable Passport with your Scope 1 and Scope 2 emissions — free, ~10 minutes.

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