The 2016 California State Sales Tax
What is the 2016 California Sales Tax Rate?
The California state sales tax rate is 7.5%, and the average CA sales tax after local surtaxes is 8.44%.
- Groceries and prescription drugs are exempt from the California sales tax
- Counties and cities can charge an additional local sales tax of up to 2.5%, for a maximum possible combined sales tax of 10%
- California has 2558 special sales tax jurisdictions with local sales taxes in addition to the state sales tax
- California has a lower state sales tax than 84.6% of states
California has one of the highest sales tax rates in the country, and had the highest for years until a tax reduction in July 2011. Cities and municipalities can charge an additional local sales tax (known as a "District Tax") on top of the California state sales tax, which means California residents can pay as much as 10% combined state and local sales tax on their purchases. The California sales tax is as high as it is, relative to the other states, as compensation for reduced property taxes in California (which were introduced by Proposition 13 in 1978).
The California sales tax applies to all sales of tangible goods, but does not apply to the sale of services. In addition to general sales tax exemptions for groceries and some prescription drugs, the sale of items such as livestock, some farm supplies, and alternative energy equipment may also be exempted from sales tax by specific legislation.
California has introduced several bills to help increase sales tax revenues, including a recent 2011 law passed to force large Internet retailers like Amazon.com to start collecting the California sales tax from their customers. The so-called "Amazon Tax" is effective for California residents as September 2012. California last raised the state sales tax by 0.25% in January 2013 with Proposition 30, and plans to keep the 0.25% raise in effect until the end of 2016.
The California Board of Equalization provides the following table detailing the allocation of sales tax revenues:
|3.6875%||State||Goes to State's General Fund ||Revenue and Taxation Code Sections 6051, 6201|
|0.25%||State||Goes to State's General Fund ||Revenue and Taxation Code Sections 6051.3, 6201.3 (Inoperative 1/1/01 – 12/31/01)|
|0.25%||State||Goes to State's Fiscal Recovery Fund, to pay off Economic Recovery Bonds (2004)||Revenue and Taxation Code Sections 6051.5, 6201.5 (Operative 7/1/04)|
|0.50%||State||Goes to Local Public Safety Fund to support local criminal justice activities (1993)||Section 35, Article XIII, State Constitution|
|0.50%||State||Goes to Local Revenue Fund to support local health and social services programs (1991 Realignment)||Revenue and Taxation Code Sections 6051.2, 6201.2|
|1.0625||State||Goes to Local Revenue Fund 2011||Revenue and Taxation Code Sections 6051.15 and 6201.15|
|1.00%||Local||0.25% Goes to county transportation funds |
0.75% Goes to city or county operations
|Revenue and Taxation Code Section 7203.1 (Operative 7/1/04)|
|7.25%||State/Local||Total California Base Sales and Use Tax Rate|
If you are a California business owner, you can learn more about how to collect and file your California sales tax return at the 2016 California Sales Tax Handbook .
California Sales Tax Exemptions
California doesn't collect sales tax on purchases of most prescription drugs and groceries. In most states, necessities such as groceries, clothes, and drugs are exempted from the sales tax or charged at a lower sales tax rate.
Some items may not be eligible for these reduced sales tax rates, such as expensive clothing, unhealthy food or drinks like soda, and certain non-essential pharmaceuticals. For sales tax purposes, California treats candy as a grocery, and does treat soda as a grocery. Other items including gasoline, alcohol, and cigarettes are subject to various California excise taxes in addition to the sales tax.
In some states, items like alcohol and prepared food (including restaurant meals and some premade supermarket items) are charged at a higher sales tax rate. The CA sales tax applicable to the sale of cars, boats, and real estate sales may also vary by jurisdiction. California's sales tax rates for commonly exempted items are as follows:
$100 Restaurant Dinner
$100 of groceries
$100 in clothes
$100 of consumer products
$7.50 sales tax
$0.00 sales tax
$7.50 sales tax
$7.50 sales tax
California Sales Tax Exemption Certificate
Unlike a Value Added Tax (VAT), the California sales tax only applies to end consumers of the product. Individuals and companies who are purchasing goods for resale, improvement, or as raw materials can use a California Sales Tax Exemption Form to buy these goods tax-free.
Companies or individuals who wish to make a qualifying purchase tax-free must have a California state sales tax exemption certificate, which can be obtained from the California Franchise Tax Board. On making an exempt purchase, Exemption Certificate holders may submit a completed California Sales Tax Exemption Form to the vendor instead of paying sales tax.
Sales tax exemption forms (as well as business sales tax id applications, sales tax returns, and the full California sales tax code) can be downloaded from the California Franchise Tax Board here .
California Sales Tax Calculator
Whenever you make a purchase at a licensed California retailer, your sales tax will be automatically calculated and added to your bill. To lookup the sales tax due on any purchase, use our California sales tax calculator.
California Use Tax
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If you buy goods and are not charged the California Sales Tax by the retailer, such as with online and out-of-state purchases, you are supposed to pay the 7.5% sales tax (less any foreign sales tax paid) for these items yourself as the California Use Tax.
Your are expected to voluntarily list your liable purchases on a California Use Tax Return, which should be attached with payment to your California Income Tax Return. Historically, compliance rates with with the California Use Tax have been low.
California Local Sales Taxes
California does not allow local jurisdictions like cities or counties to collect a local sales tax. The California state sales tax of 7.5% is applicable statewide. You can view the sales tax rates for various cities in California here.
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