California Sales Tax Rates

Total Range for 2024

7.25% – 10.25%

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Why do you need to collect sales tax in California?

If you’re selling goods and services in California then sales tax might apply! To determine your obligation, we need to understand “nexus,” which ties businesses to states for tax purposes.

Two types of nexus exist:

  • Physical Nexus: Having a physical presence, like an office, warehouse, or employees in California, triggers this type. If you do, you likely need to collect sales tax.
  • Economic Nexus: This kicks in when your sales within California exceed a certain economic threshold. Even without a physical presence, surpassing this threshold requires collecting sales tax.

Is what you’re selling taxable in California?

Now that you understand your California sales tax obligations, the next step is to determine if the specific products or services you offer are subject to California sales tax.

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Check the California Department of Tax and Fee Administration (CDTFA) website for a detailed list of exempt and taxable services or consult a tax professional (like us!).

How to register for sales tax in California

If you’ve worked out that you do have a physical or economic nexus (or both), then the next step is to register for sales tax in the state. In California there are two ways to do this:

  1. Register online:
  • Visit the CDTFA website
  • Click on “Register” and then “Register a New Business Activity.”
  • Complete the online application form, providing information about your business, product/services, and expected sales.
  1. Register by mail:
  • Download the Application for Seller’s Permit (Form REG 250) from the CDTFA website.
  • Complete the form and mail it to the address provided on the form.

How to collect sales tax in California

While collecting based on the buyer’s location (destination) is generally recommended, California’s “hybrid” system adds complexity for businesses with a physical presence in the state:

Hybrid System Breakdown:

  • District Tax: This is an additional sales tax on top of the state rate (7.25%).
  • Districts: Think of these as specific areas within California, like cities, counties, or special districts. Each district sets its own rate, ranging from 0.10% to 1.00%.
  • Location Impact:
    • One California location: You’ll charge two rates: 
      1. Your district rate for buyers within your district.
      2. The state rate for buyers outside your district.
    • Multiple California locations: Things get trickier. You might need to charge different rates depending on buyer locations and your various district presence.

Example:

Your business resides in District A with a 0.50% rate.

  • A buyer within your district purchases a $100 item. You charge 7.25% state tax + 0.50% district tax = 7.75% = $7.75 in tax.
  • A buyer outside your district but still in California purchases a $100 item. You charge only the state tax = 7.25% = $7.25 in tax.

FAQs

Do you have a physical nexus in California?

In California, retailers have physical nexus if they have:

  • A physical location (office, warehouse, etc.)
  • Employees representing them in the state
  • Affiliates driving $10k+ sales and exceeding $1M in-state sales
  • Tradeshow presence exceeding 15 days or generating $100k+ of income
Do you have an economic nexus in California?

As of April 26, 2019, if your business makes over $500,000 in taxable sales annually to California, you have economic nexus, requiring you to collect sales tax from California buyers.

What is use tax in California?

California businesses, beware! You owe use tax (currently 7.5%) on out-of-state purchases where:

  • The seller didn’t collect California sales or use tax.
  • The item is used, given away, stored, or consumed within California.
Do you need a seller/reseller permit?

If you’re paying sales tax, you need a seller permit

In California, a seller’s permit (also known as a resale certificate in some other states) serves two main purposes:

  1. Authorizing Sales Tax Collection:
  • If you have nexus in California (meaning you meet specific criteria establishing a connection to the state for tax purposes), this permit allows you to collect sales tax from your customers on taxable goods and services.
  • This collected tax is then remitted to the CDTFA.
  1. Enabling Tax-Free Purchases:
  • If you’re a reseller who purchases products to resell later (not for personal use), a seller’s permit allows you to purchase them tax-free from your suppliers.
  • This avoids paying sales tax twice (once on purchase and again on resale).
How to get a sales tax permit/license in California?

Online: Go to the CDTFA website and click “Register a New Business Activity.”

In-person: Visit a CDTFA field office.

Required information:

  • Basic personal info (SSN, DL number, email)
  • Business details (EIN, NAICS code, etc.)
  • Banking and financial info
  • Contact information for references and suppliers

Note:

  • There is no application fee, but a security deposit might apply.
  • Consult the CDTFA website for complete details and possible additional fees.
When are California’s Returns Due?

When it comes to filing and paying California sales tax, two things dictate your schedule: your designated filing frequency and state-set due dates. Upon registering for a sales tax permit, you’ll receive a specific filing frequency (monthly, quarterly, etc.).

Remember, state due dates always fall on the last day of the month following your reporting period. However, keep in mind that weekends and holidays might push the deadline to the next business day.

Additionally, high-volume sellers might have monthly prepayments on top of regular filings.

How to file sales tax in California?

There are three steps to filing tax in California:

  1. Calculate: Don’t worry about formulas! Tools like Yonda Tax can easily calculate your owed sales tax based on your sales channels like Amazon, eBay, Shopify, etc. They even provide step-by-step guides for hassle-free filing.
  2. File: Choose your method: online through the California Department of Tax and Fee Administration, by mail with the short form, or let Yonda Tax handle it automatically. Remember, online payments are required for high tax liabilities.
  3. Pay: Submit your payment with your chosen filing method. Again, Yonda Tax simplifies this by managing both filing and payments for you.
Is anyone exempt from sales tax in California?

Yes, there are some exemptions from sales tax in California. Here are some examples:

Individuals:

  • Groceries: Most unprepared food items are exempt, with some exceptions like prepared foods, hot beverages, and alcoholic beverages.
  • Prescription drugs and medical devices: These are exempt from sales tax.
  • Certain clothing and footwear: Clothing and footwear priced under $100 per item (excluding accessories) are exempt.

Businesses:

  • Resale purchases: Businesses with a valid seller’s permit can purchase goods for resale tax-free.
  • Manufacturing equipment: Some types of manufacturing equipment are exempt from sales tax.
  • Agricultural products: Sales of agricultural products directly from farmers to consumers are exempt.

Organizations:

  • Non-profit organizations: Qualified non-profit organizations are exempt from sales tax on purchases related to their exempt activities.
  • Government agencies: Purchases made by government agencies are exempt from sales tax.

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