Do You Have Questions About Sales Tax?
We have answered some of the most frequently asked questions for you!
1. Are wholesale transactions taxable?
When you sell to another seller who is buying the item to resell in the regular course of business, tax will not apply to your sale. To document a sale for resale, you should obtain, in good faith, a timely and valid California resale certificate from your customer. You may claim a deduction for your sales for resale on your sales and use tax return.
2. Are sales of food products taxable?
Sales of food products for human consumption are generally not taxable. But tax on food product sales depends on many conditions, including, who makes the sale, where the sale occurs, who the customer is, and what is sold. For example, the following sales are generally taxable:
- Sales of alcoholic and carbonated beverages;
- Sales of hot prepared food products;
- Food sold for consumption where there is an admission charge; or
- Sales of food and beverages if those items are served for consumption at your place of business.
You are considered to have a place of business where customers may consume their purchases if, for example:
- You provide tables and chairs or counters for dining, or provide trays, glasses, dishes, or other tableware; or
- You are located in a shopping mall and are near dining facilities provided by the mall. For example, you are located in or near a food court or near an area where tables and chairs are provided for dining.
You may claim a deduction for your nontaxable sales of food products on your sales and use tax return.
For more information, see Sales and Use Tax Regulations 1602, Food Products; 1603, Taxable Sales of Food Products; publication 31, Grocery Stores; and publication 22, Dining and Beverage Industry. Vending machine operators should see Sales and Use Tax Regulation 1574, Vending Machine Operators.
3. Can I take a deduction for sales or use taxes included in reported sales?
If you include the amount of sales or use taxes you collected from your customer in your reported total sales on your sales and use tax return, you may claim a deduction for the tax amount included. For example, if you include in your reported total sales the amount of sales tax included in the selling price of the item you sell, you may deduct that amount on your return. However, if you deduct sales tax collected from total sales prior to entering your reported total sales on your return, you may not claim this deduction. The proper amount of tax included must be calculated when claiming the sales tax included deduction.
For more information, see Sales and Use Tax Regulation 1700, Reimbursement for Sales Tax.
4. Can I claim a deduction for items I paid tax on and later resold?
If you purchase an item and pay California sales tax reimbursement or use tax on the purchase but sell the item prior to making any use of the item (other than retaining, demonstrating, or displaying it while holding it for resale in the regular course of business), you may deduct from the sales price the amount you previously paid your vendor for sales tax or the amount of use tax you paid the state. You may claim a deduction for tax-paid purchases resold on your sales and use tax return.
5. Are prescription medicines taxable?
In general, retailers are not required to pay sales tax on sales of prescription medicines when prescribed and sold under certain conditions for the treatment of a human being. Medicines are preparations or substances intended to treat, diagnose, cure, mitigate, or prevent disease in humans. Medicines also include certain articles, devices, and medical appliances. In general, to qualify for the exemption, the medicine or medical device must be prescribed by a person authorized to prescribe the medicine or medical device, such as a licensed physician, dentist, or podiatrist, and the prescription must be filled by a registered pharmacist. You may deduct these exempt sales of prescription medicines from your total sales in the deductions section under “Other” on your sales and use tax return.
NOTE: This page contains a general summary of the applicable law. There are many factors not discussed on this page. You should not rely on this information alone in determining how to complete your sales and use tax returns. For additional information, please call the Taxpayer Information Center at 1-800-400-7115 (TTY:711) weekdays from 8:00 a.m. to 5:00 p.m. (Pacific time), except state holidays.
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