Sales and use taxes in California
Encyclopedia
Sales and use taxes in California are among the highest in the United States and can be levied by the state and local governments.
has the highest minimum state sales tax in the United States, which can total up to 9.75% with local sales tax included. Partly this rate compensates for the much reduced property tax revenue brought on by Proposition 13. Sales and use taxes in the state of California are collected by the publicly elected Board of Equalization, whereas income and franchise taxes are collected by the Franchise Tax Board
. The statewide 7.25% is allocated as:
Additional sales taxes levied by counties and municipalities are formally called "District Taxes". For example, San Francisco has a 1.25% district tax, which is added onto the state sales tax base rate of 7.25% to make a total sales tax rate of 8.5% within San Francisco.
Between April 1, 2009 and ending
June 30, 2011, the state sales and use tax increased by 1% as a result of the 2008-2009 California budget crisis.
Supplementary sales tax may be added (with voter approval) by cities, counties, service authorities, and various special districts (such as the Bay Area Rapid Transit
district). The effect is that sales tax rates vary from 7.25% (in areas where no additional taxes are charged) to 9.75% (as of July 1, 2009, the city of South Gate
and Pico Rivera
increased their sales-tax rate to this level, the highest in California). For instance, Sacramento
, the state capital, has a combined 7.75% sales tax rate, and Los Angeles
, the largest city in the state, has a combined 8.75% sales tax rate.
The last changes to the published local tax rates took effect on July 1, 2011. Official updates are published on the Board of Equalization website and also in Publication 71.
of Berkeley has twice introduced legislation to apply sales tax to online retailers such as Amazon.com only to have the bills be vetoed by the governor. On 19 January 2011 Skinner introduced similar legislation in the form of AB153.
The bill requires out-of-state online sellers with affiliates in California to collect sales tax on purchases made by state residents. The affiliate provision was included to ensure that only sellers with a California nexus are taxed, as required by federal law and the U.S. Supreme Court's ruling in Quill Corp. v. North Dakota
.
Vehicle purchases are taxed based on the city and county in which the purchaser registers the vehicle, and not on the county in which the vehicle is purchased. There is therefore no advantage in purchasing a car in a cheaper county to save on sales tax (a one-percent difference in sales tax rate would otherwise result in an additional $300 loss on a $30,000 car).
In grocery stores, unprepared food items are not taxed but vitamins and all other items are. Ready-to-eat hot foods, whether sold by supermarkets or other vendors, are taxed. Restaurant bills are taxed. As an exception, hot beverages and bakery items are tax-exempt if and only if they are for take-out and are not sold with any other hot food. If consumed on the seller's premises, such items are taxed like restaurant meals. All other food is exempt from sales tax.
Also excluded are food animals (livestock), food plants and seeds, fertilizer used to grow food, prescription drugs and certain medical supplies, energy utilities, certain alternative energy devices and supplies, art for display by public agencies, and veterans' pins. There are many specific exemptions for various veterans', non-profit, educational, religious, and youth organizations. Sale of items to certain out-of-state or national entities (mostly transportation companies) is exempt, as are some goods sold while in transit through California to a foreign destination.
Occasional or one-time sales not part of a regular business are exempt, except that sales of three or more non-food animals (puppies, kittens, etc.) per year are taxed.
There are also exemptions for numerous specific products, from telephone lines and poles, to liquid petroleum gas for farm machinery, to coins, to public transit vehicles. There are partial exemptions for such varied items as racehorse breeding stock, teleproduction service equipment, farm machinery, and timber-harvesting equipment. For an organized list of exemptions, with estimates for how much revenue the state loses and the people saves for each, see Publication 61 of the Board of Equalization.
Sales tax is charged on gasoline
. The tax is levied on both the gasoline and on the federal and state excise taxes, resulting in a form of "double taxation". The sales tax is included in the metered price at the pump. The California excise tax on gasoline is 18 cents a gallon.
Motor vehicle gasoline and jet fuel are subject to special taxation regimes. In 2005, there was a political dispute in the San Francisco Bay Area about whether revenues for jet fuel should be credited to San Mateo County (where San Francisco International Airport
appears to be physically located), the City and County of San Francisco (where the airport is legally located, because it is owned by the City-County), or Alameda County, where Oakland International Airport
is located. (The distinction is largely point of sale delivery vs. point of negotiation for the sale.) This is controlled by Regulation 1802, which has other provisions about businesses which have multiple locations.
A quick reference for the sales tax charged by every city/community in the state may be found at: http://www.boe.ca.gov/cgi-bin/rates.cgi?LETTER=S&LIST=CITY
Rates
At 7.25%, CaliforniaCalifornia
California is a state located on the West Coast of the United States. It is by far the most populous U.S. state, and the third-largest by land area...
has the highest minimum state sales tax in the United States, which can total up to 9.75% with local sales tax included. Partly this rate compensates for the much reduced property tax revenue brought on by Proposition 13. Sales and use taxes in the state of California are collected by the publicly elected Board of Equalization, whereas income and franchise taxes are collected by the Franchise Tax Board
California Franchise Tax Board
The California Franchise Tax Board collects state personal income tax and corporate income tax of California. It is part of the California State and Consumer Services Agency....
. The statewide 7.25% is allocated as:
- 7.25% - State + Local
- 6.25% - State
- 5.00% - State - General Fund
- 0.25% - State - Fiscal Recovery Fund
- 0.50% - State - Local Revenue Fund
- 0.50% - State - Local Public Safety Fund
- 1.00% - Uniform Local TaxBradley-Burns Uniform Local Tax LawThe Bradley-Burns Uniform Local Tax Law allows a a percentage to be added to a state-wide sales tax, with the proceeds applied to benefit counties and cities of that state. Generally the revenue obtained from the Uniform Local Tax funds various county and city needs such as transportation and...
- 0.25% - Local County - Transportation funds
- 0.75% - Local City/County - Operational funds
- 6.25% - State
Additional sales taxes levied by counties and municipalities are formally called "District Taxes". For example, San Francisco has a 1.25% district tax, which is added onto the state sales tax base rate of 7.25% to make a total sales tax rate of 8.5% within San Francisco.
Between April 1, 2009 and ending
Sunset provision
In public policy, a sunset provision or clause is a measure within a statute, regulation or other law that provides that the law shall cease to have effect after a specific date, unless further legislative action is taken to extend the law...
June 30, 2011, the state sales and use tax increased by 1% as a result of the 2008-2009 California budget crisis.
Supplementary sales tax may be added (with voter approval) by cities, counties, service authorities, and various special districts (such as the Bay Area Rapid Transit
Bay Area Rapid Transit
Bay Area Rapid Transit is a rapid transit system serving the San Francisco Bay Area. The heavy-rail public transit and subway system connects San Francisco with cities in the East Bay and suburbs in northern San Mateo County. BART operates five lines on of track with 44 stations in four counties...
district). The effect is that sales tax rates vary from 7.25% (in areas where no additional taxes are charged) to 9.75% (as of July 1, 2009, the city of South Gate
South Gate, California
South Gate is a city in Los Angeles County, California, United States. The sixteenth largest city in Los Angeles County, it encompasses . South Gate is located just southeast of downtown Los Angeles It is part of the Gateway Cities region of southeastern Los Angeles County...
and Pico Rivera
Pico Rivera, California
Pico Rivera is a city located in southeastern Los Angeles County, California, United States. The city is situated approximately 11 miles southeast of downtown Los Angeles, on the eastern edge of the Los Angeles basin, and on the southern edge of the area known as the San Gabriel Valley...
increased their sales-tax rate to this level, the highest in California). For instance, Sacramento
Sacramento, California
Sacramento is the capital city of the U.S. state of California and the county seat of Sacramento County. It is located at the confluence of the Sacramento River and the American River in the northern portion of California's expansive Central Valley. With a population of 466,488 at the 2010 census,...
, the state capital, has a combined 7.75% sales tax rate, and Los Angeles
Los Ángeles
Los Ángeles is the capital of the province of Biobío, in the commune of the same name, in Region VIII , in the center-south of Chile. It is located between the Laja and Biobío rivers. The population is 123,445 inhabitants...
, the largest city in the state, has a combined 8.75% sales tax rate.
The last changes to the published local tax rates took effect on July 1, 2011. Official updates are published on the Board of Equalization website and also in Publication 71.
Taxation of online sales
Assemblywoman Nancy SkinnerNancy Skinner
Nancy Skinner is a nationally syndicated radio and television commentator, based in Detroit, Michigan.She has run for political office several times, all unsuccessfully. In 2004, she was a Democratic candidate for an open U.S. Senate seat in Illinois, losing in the Democratic primary election to...
of Berkeley has twice introduced legislation to apply sales tax to online retailers such as Amazon.com only to have the bills be vetoed by the governor. On 19 January 2011 Skinner introduced similar legislation in the form of AB153.
The bill requires out-of-state online sellers with affiliates in California to collect sales tax on purchases made by state residents. The affiliate provision was included to ensure that only sellers with a California nexus are taxed, as required by federal law and the U.S. Supreme Court's ruling in Quill Corp. v. North Dakota
Quill Corp. v. North Dakota
Quill Corp. v. North Dakota, 504 U.S. 298 is a Supreme Court ruling concerning use tax. Quill Corporation is an office supply retailer...
.
Exemptions
In general, sales tax is required on all purchases of tangible personal property to its ultimate consumer. Services are not subject to sales tax (but may be subject to other taxes). Liability for sales tax attaches to the seller, not the buyer; but the seller is allowed by law to collect the tax from the buyer (and if the seller does so, the buyer is obligated to pay it).Vehicle purchases are taxed based on the city and county in which the purchaser registers the vehicle, and not on the county in which the vehicle is purchased. There is therefore no advantage in purchasing a car in a cheaper county to save on sales tax (a one-percent difference in sales tax rate would otherwise result in an additional $300 loss on a $30,000 car).
In grocery stores, unprepared food items are not taxed but vitamins and all other items are. Ready-to-eat hot foods, whether sold by supermarkets or other vendors, are taxed. Restaurant bills are taxed. As an exception, hot beverages and bakery items are tax-exempt if and only if they are for take-out and are not sold with any other hot food. If consumed on the seller's premises, such items are taxed like restaurant meals. All other food is exempt from sales tax.
Also excluded are food animals (livestock), food plants and seeds, fertilizer used to grow food, prescription drugs and certain medical supplies, energy utilities, certain alternative energy devices and supplies, art for display by public agencies, and veterans' pins. There are many specific exemptions for various veterans', non-profit, educational, religious, and youth organizations. Sale of items to certain out-of-state or national entities (mostly transportation companies) is exempt, as are some goods sold while in transit through California to a foreign destination.
Occasional or one-time sales not part of a regular business are exempt, except that sales of three or more non-food animals (puppies, kittens, etc.) per year are taxed.
There are also exemptions for numerous specific products, from telephone lines and poles, to liquid petroleum gas for farm machinery, to coins, to public transit vehicles. There are partial exemptions for such varied items as racehorse breeding stock, teleproduction service equipment, farm machinery, and timber-harvesting equipment. For an organized list of exemptions, with estimates for how much revenue the state loses and the people saves for each, see Publication 61 of the Board of Equalization.
Sales tax is charged on gasoline
Gasoline
Gasoline , or petrol , is a toxic, translucent, petroleum-derived liquid that is primarily used as a fuel in internal combustion engines. It consists mostly of organic compounds obtained by the fractional distillation of petroleum, enhanced with a variety of additives. Some gasolines also contain...
. The tax is levied on both the gasoline and on the federal and state excise taxes, resulting in a form of "double taxation". The sales tax is included in the metered price at the pump. The California excise tax on gasoline is 18 cents a gallon.
Motor vehicle gasoline and jet fuel are subject to special taxation regimes. In 2005, there was a political dispute in the San Francisco Bay Area about whether revenues for jet fuel should be credited to San Mateo County (where San Francisco International Airport
San Francisco International Airport
San Francisco International Airport is a major international airport located south of downtown San Francisco, California, United States, near the cities of Millbrae and San Bruno in unincorporated San Mateo County. It is often referred to as SFO...
appears to be physically located), the City and County of San Francisco (where the airport is legally located, because it is owned by the City-County), or Alameda County, where Oakland International Airport
Oakland International Airport
Oakland International Airport , also known as Metropolitan Oakland International Airport, is a public airport located south of the central business district of Oakland, a city in Alameda County, California, United States...
is located. (The distinction is largely point of sale delivery vs. point of negotiation for the sale.) This is controlled by Regulation 1802, which has other provisions about businesses which have multiple locations.
A quick reference for the sales tax charged by every city/community in the state may be found at: http://www.boe.ca.gov/cgi-bin/rates.cgi?LETTER=S&LIST=CITY