SALES TAX 101 for CALIFORNIA

By December 3, 2018 California, States, User Portal

The 10 Basics Every California Business Should Know About SALES TAX

What is Sales Tax in California?

Retailers engaged in business in California must register with the California Department of Tax and Fee Administration (CDTFA) and pay the state’s sales tax, which applies to all retail sales of goods and merchandise except those sales specifically exempted by law.

Are All Goods and Services Taxable?

No

How Do I Know What’s Taxable and What’s Not?

This link can help you determine what is taxable and what isn’t in CALIFORNIA by industry.

Who Pays Sales Tax?

Consumers pay sales tax. Merchants do not pay sales tax out of their own pockets. It’s commonly referred to as a pass through tax.

What Am I Responsible For?

You are required to collect sales tax, hold it secure and send it to the State on-time and in-full.

When Is My Sales Tax Payment Due in California?

In California your tax filing frequency is determined by the State based on your revenue and payment history. You may be an annual, quarterly or monthly filer or a quarterly filer with prepayments. Contact the state to determine your sales tax due date. Click here for a list of due dates.

How Do I Know How Much Sales Tax to Charge? 

Sales tax rates in California are a combination of the state, county and city taxes. They can be found here. The final and definitive answer is always the sales tax rate posted on State Department of Revenue website. Rates posted on the web are often not up-to-date and incorrect. It’s always the merchant’s responsibility to charge the correct sales tax rate.

Who Gets the Sales Tax Money?

In California all sales tax, State and County, gets paid directly to the State.

How Do I Manage Tax Exempt Sales?

Tax exempt organizations such as schools and religious organizations are often exempt from sales tax. They are required to give you copy of their “TAX EXEMPT CERTIFICATE” at the time of the sale and you are required to keep this certificate on file. Failing to do so may result in you paying the sales tax out of your own pocket if you have a sales tax audit.

What if I Forget to Pay or Spend the Money and Can’t Pay?

California has severe penalties for missing tax payments. You can find the penalties for late payments here. If you received a letter from the state for a late sales tax payment, you can call 1-800-400-7115 for assistance. If sales tax goes unpaid, states will seize the assets of the business or owner and auction them off to pay the debt. In extreme cases owners will be prosecuted and sent to jail. Even if the business closes, sales tax is a personal liability that will follow the owner until paid.

California Department Of Revenue

TAX RATE: The sales and use tax rate in a specific California location has three parts: the state tax rate, the local tax rate, and any district tax rate that may be in effect. Click here to find your tax rate.

California Department of Tax & Fee Administration COLLECTION HELP: 1-800-400-7115

This resource page is for informational purposes only.  If you have further questions regarding sales tax please contact DAVO support at 888-659-8432 or consult your tax adviser.

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