California residents face a variety of taxes in their daily lives. Among them, sales and use taxes play an important role for consumers and business owners. This article provides an overview of California sales and use taxes.
What are Sales Tax and Use Tax?
California sales tax is levied on all retailers who retail tangible personal property in the state. Leases of tangible personal property are also subject to sales tax, with specific exceptions.
On the other hand, California’s use tax is levied on the purchase of tangible personal property for storage, use, or consumption in the state if no sales tax has been paid in California state.
What is tangible personal property?
Tangible personal property is anything you can see or touch. This includes works of art, bicycles, toys, clothing, antiques, food, and furniture. Conversely, real estate, securities, transmission of digital works via telecommunications, etc. are not included in tangible personal property.
California sales and use tax structure
The components of sales and use tax are:
- State Tax: 6%
- Local Tax: 1.25%
This brings the total base tax rate across California to 7.25%. （6% State + 1.25% Local）
In addition, a District Tax (0.1% to 1.00%), which varies by city and county, is added to the base rate of 7.25%. The detailed tax rate for District Tax depends on where the sale occurs. Please check the official information for the latest tax rates.
Seller’s Permit and Sales Tax Exemption
Individuals, corporations, partnerships, etc. selling or leasing tangible personal property must obtain a sales license from the CDFTA (California Department of Tax and Fee Administration).
In some cases, sales tax is exempted. for example,
・Sale for resale – A resale certificate is required.
・Some foods – foods that are not consumed immediately and cold take-out foods
・Labor for the purpose of repair or installation
・Sale to the U.S. Federal Government
・Sales in interstate and foreign trade
How to pay sales and use tax
If you have a Seller’s Permit:
・Sales and use tax returns can be prepared and paid to the CDFTA.
If you do not have a sales license or sales tax account:
・You can pay use tax to the Franchise Tax Board (FTB) through your California personal income tax return.
・You can also pay use tax directly to the CDFTA through the mobile app or the CDTFA online service.
Thus, understanding California sales and use taxes can help individuals and businesses manage their taxes properly and comply with the law.
Summary
California sales and use taxes are taxes you face in your daily life in California and are levied on the retail sale of Tangible Personal Property.
Sales tax is levied on retail sales and leasing, and use tax is levied on purchase, storage, use and consumption when sales tax is unpaid.
Tangible personal property is anything you can see or touch.
Sales and use tax composition is State Tax (6%) + Local Tax (1.25%) = 7.25% total. District Tax will be added.
You need to obtain a Seller’s Permit and declare and pay sales tax.
There are also sales tax-exempt cases: for resale purposes, some food items, repairs/installations, sales to the federal government, etc.
How to pay sales and use tax: If you have a sales license, you can pay it to the CDFTA, if not, you can pay it through the FTB or online.
Understanding California sales and use taxes can help individuals and businesses manage their taxes and comply with the law.
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