Taxability issues and applicable tax rates

As a seller, you owe the sales tax and are responsible for paying the correct amount to the Board. If you do not pay the correct amount, you are subject to additional tax charges plus applicable penalties and interest charges. We can assist you in determining the applicable tax rate and taxability issues in your specific business. See below for some information regarding general taxability issues.

Retail sales of tangible personal property in California are generally subject to Sales Tax. Examples of tangible personal property include such items as furniture, giftware, toys, antiques, clothing, and so forth. In addition, some service and labor costs are subject to sales tax if they result in the creation of tangible personal property.

In some instances, retailers must pay use tax, rather than sales tax, to the Board. The most common example of a purchase subject to the use tax is a purchase of an item for use in California from an out-of-state retailer. Out-of-state retailers who are engaged in business in this state are required to collect the use tax, whenever applicable, from the consumer at the time of making the sale.

Some sales and purchases are exempt from sales and use tax. Examples of exempt sales include, but not limited to, sales of certain food products for human consumption, sales to the U.S. Government, and sales of prescription medicine. For more information on exempt sales, please refer to publication 61, Sales and Use Taxes: Exemptions and Exclusions.