Navigating California's Taxscape: Understanding Sales, Use Tax, and Key Exemptions
How does the sales and use tax in California operate, and what are some notable exemptions from this tax?
The sales and use tax in California is a consumption tax imposed on the sale, use, consumption, and storage of tangible personal property. Here are some key aspects of the sales and use tax in California:
- Sellers are responsible for collecting and remitting sales tax to the California Department of Tax and Fee Administration (CDTFA) based on the sales price of taxable goods.
- The statewide sales tax rate is currently 7.25%. However, additional district taxes may apply, resulting in varying total sales tax rates across different jurisdictions in California.
- Sales tax is typically collected at the point of sale, but it can also be based on the place of delivery (use tax) if the seller does not collect sales tax.
- Use tax applies when taxable goods are purchased from out-of-state sellers who do not collect sales tax, or when taxable goods are purchased for use in California from a seller who fails to collect sales tax.
- Use tax is self-assessed and paid directly by the purchaser to the CDTFA.
- Use tax rates are generally the same as sales tax rates.
**Exemptions and Exclusions:**
There are several notable exemptions and exclusions from the California sales and use tax while the Wayfair decision has significantly impacted sales tax collection for remote sellers, it is important to note that sales tax laws for remote sellers can vary from state to state. Each state sets its own economic nexus thresholds and guidelines for sales tax collection. Therefore, it is crucial for businesses to understand the specific nexus guidelines and requirements in each state where they have sales activities.
To comply with the new requirements, remote sellers should consider the following steps:
1. Determine if they meet the economic nexus thresholds in each state where they make sales.
2. Register for a sales tax permit in each state where they have nexus.
3. Collect sales tax on taxable sales made to customers in those states.
4. Remit collected sales tax to the appropriate state taxing authority on a regular basis.
It is worth mentioning that there may be additional complexities with sales tax compliance, such as varying tax rates, exemptions, and product taxability rules. Seeking guidance from a tax professional or using sales tax compliance software can help remote sellers navigate these complexities and ensure they are properly collecting and remitting sales tax in compliance with the laws of each applicable jurisdiction.