Tax Rate FAQ for Sales and Use Tax

  1. What is the difference between sales tax and use tax?
  2. Tax rates for California cities and counties
  3. Recent tax rate changes
  4. Can zip codes be used to determine the proper tax rate?
  5. Are you a retailer "engaged in business" in a district?
  6. Who is responsible for reporting district taxes?
  7. Retailers with one location
  8. Retailers with multiple locations
  9. As a retailer, am I liable for district tax in a district where I solicit and accept a sale when the property is never physically in the district?
  10. If I am located in a district, am I liable for my district's tax if I make a sale to a person located outside the district?
  11. If I purchase property at a lower rate of tax, am I required to pay additional district tax if I use the property in a district with a higher tax rate?
  12. If I am not located in a district and deliver property to my customer at my place of business, must I collect district use tax if the customer's billing address is located in a tax district?
  13. As a retailer (dealer) of vehicles or undocumented vessels, what tax rate should I charge my customers?
  14. As a retailer (dealer) of vehicles or aircraft, what tax rate should I charge my customers?
  15. As a purchaser am I responsible for reporting district taxes?
  16. Fixed-price contracts and district taxes.

  1. What is the difference between sales tax and use tax?

    Sales tax

    • California sales tax is imposed on all California retailers.
    • It applies to all retail sales of merchandise (tangible personal property) in the state.
    • Retailers are required to obtain a seller’s permit and to report and pay sales tax to the Board of Equalization.
    • Retailers have the option of (reimbursing themselves) collecting sales tax from their customers. Most retailers choose this option.
    • Whether or not a retailer collects sales tax, the retailer is liable to report and pay the tax due.

    Use tax

    • California use tax is imposed on consumers of merchandise (tangible personal property) that is used, consumed, or stored in this state.
    • Consumers in California owe use tax on purchases from out-of-state retailers when the out-of-state retailer is not registered to collect California tax, or for some other reason does not collect California tax.
    • Applies to leases of merchandise (tangible personal property), including vehicles, vessels, and aircraft. Please see FAQ #7 and FAQ #14 for information on vehicles, vessels, and aircraft.
    • Applies to purchases made in foreign countries and hand carried through U.S. Customs into California.
    • The state sales tax and use tax are "mutually exclusive," which means either sales tax or use tax may apply to a single transaction, but not both.

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  2. Tax rates for California cities and counties

    Many of California's cities, counties, towns, and communities have special taxing jurisdictions (districts), referred to as district taxes, which impose a transactions (sales) and use tax in addition to the standard statewide rate of 7.50%.

    • District taxes increase the tax rate in a particular area by adding the district tax to the basic statewide rate of 7.50% (effective January 1, 2013).
    • Rates for these districts range from 0.10% to 1.00% per district.
    • In some areas, there is more than one district tax in effect.
    • In others, there is no district tax in effect.
    • As a seller or a consumer, you are required to report and pay the applicable district taxes for your taxable sales and purchases in that district.

    To find the sales and use tax rate, you may use the online tool to look up a tax rate by address.

    For more information, please refer to publication 44, Tax Tips for District Taxes, or publication 105, District Taxes and Delivered Sales. These publications are available on our website or they can also be mailed to you by contacting our Customer Service Center at 1-800-400-7115.

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  3. Recent tax rate changes

    Rates change often as voters approve new tax districts and old districts expire. We provide recent updates in Special Notices and on the California City & County Sales & Use Tax Rates webpage.
    To find the current sales and use tax rate, you may use the online tool to look up a tax rate by address. 

    On the California City & County Sales & Use Tax Rates webpage, you will also find the following information:

    • The rates and effective dates for specific district taxes.
    • Information concerning recent tax rate changes.
    • The history of sales and use tax rates, and
    • The combined sales, use, and district tax rate in certain cities and communities in California.
  4. Can zip codes be used to determine the proper tax rate?

    No, it is not always possible to determine the correct tax rate based solely on a mailing address or zip code. For example:

    • A customer may have a zip code and city name whose mail is routed to a post office in a neighboring area which has a different tax rate. If you relied solely on the post office mailing address to determine the tax rate, you might assume the customer lived in a county or city other than the one in which he or she actually resides. As a result, you could apply an incorrect tax rate.
    • Post Office mailing addresses sometimes use a “city” designation other than the actual city in which the addressee is located. For example, in Los Angeles County, the “cities” of Hollywood, Van Nuys, Sherman Oaks, San Pedro, West Los Angeles, and Eagle Rock are actually located within the City of Los Angeles.

    To assist retailers and consumers in identifying addresses located within special taxing jurisdictions, some cities have developed an online database of addresses. In cooperation with these cities, our website provides a link to their address databases at: www.boe.ca.gov/sutax/cityaddresses.htm. If you have questions about the addresses, you should contact the cities directly.

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  5. Are you a retailer “engaged in business” in a district?

    You are considered “engaged in business” in a district if you

    • Ship or deliver the property into the district using your own vehicle.
    • Maintain, occupy, or use any type of office, sales room, warehouse, or other place of business in the district, even if it is used temporarily, indirectly, or through an agent.
    • Have any kind of representative operating in the district for the purposes of making sales or deliveries, installing or assembling tangible personal property, or taking orders.
    • Derive rentals from a lease of tangible personal property located in the district.
    • Sell or lease vehicles or undocumented vessels which will be registered in a district.
  6. Who is responsible for reporting district taxes?

    Transactions (sales) tax is imposed on the sale of merchandise (tangible personal property) in a district, and you are generally responsible for reporting transactions tax if

    • You are a retailer "engaged in business" in a district. (See FAQ #8)
    • If you have more than one business location, your liability for district tax will depend on the location at which you conduct principal negotiations for your sales.

    For more information about the application of tax to sales by businesses with multiple locations, please see FAQ#5.

    District use taxes are imposed on the storage, use or other consumption of merchandise (tangible personal property) in a district. You may be responsible for reporting district use tax if:

    • You are "engaged in business" in a district, or
    • You lease, store, or consume merchandise (tangible personal property) in a district.

    Declaration to relieve retailer of obligation to collect district use tax for sales delivered to purchaser outside of the district

    • Regulation 1823.4, Place of Delivery of Tangible Personal Property-Generally, provides an exemption for the purposes of the use tax, not the transactions (sales) tax. A retailer may be relieved of the obligation to collect the use tax (for sales other than vehicles, aircraft, and vessels) imposed by a district when you ship or deliver merchandise (tangible personal property) outside of that district to a purchaser's principal residence address or principal business address.
    • You are relieved of the obligation by accepting, in good faith, a properly executed declaration under penalty of perjury, as provided in Regulation 1823.4.

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  7. Retailers with one location

    If you are a retailer who’s only business location is in a district, you must generally report and pay the district’s transactions tax on all your sales unless:

    • You, your agent, or a common carrier ships or delivers the property to an out-of-state or out-of-district location, or
    • The sale is exempt from the general sales tax or is otherwise exempt from the transactions tax.

    If your business is located outside a district, your over-the-counter sales are not subject to transactions tax. However, for property that you ship or deliver into a district, you may be liable for district use tax if you are “engaged in business” in that district.

  8. Retailers with multiple locations

    If you are a retailer with more than one location, the place of sale is generally considered the location at which you carry on principal negotiations even if you must forward the order to another location for acceptance, approval of credit, shipment, or billing. Your employees’ activities will be attributed to the location from which they work. Consequently, sales made or negotiated by employees, at places located in districts, are generally subject to transactions tax.

    As with a single location business, you are allowed an exemption from district tax for property which is shipped to an out-of-state location or for property which is also exempt from the sales and use tax.

    You are not liable for transactions tax on sales made at business locations outside districts. You may, however, be liable for collecting district use tax if you ship the property into a district in which you are “engaged in business.”

    You are not liable for transactions tax on sales made

    • At business locations outside districts.
    • When you accept a declaration in good faith as provided in Regulation 1823.4, Place of Delivery of Tangible Personal Property Generally.

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  9. As a retailer, am I liable for district tax in a district where I solicit and accept a sale when the property is never physically in the district?

    The transactions (sales) tax does not apply to property sold within a district but shipped or delivered, as agreed to in the contract of sale, to a point outside the district.

    You are generally liable for the district use tax in your customer’s district, if you are “engaged in business” in the district in which you deliver the merchandise. (See FAQ #5)

  10. If I am located in a district, am I liable for my district's tax if I make a sale to a person located outside the district?

    You are generally not liable for your district’s tax if the customer does not take possession of the property in your district.

    However, if your customer is located in another district, you are generally liable for that district’s use tax if:

    • You are “engaged in business” in that district and you ship or deliver the property, as agreed to in the contract of sale, into the district (or otherwise participate in the district in the making of the sale), or
    • You are a licensed dealer selling a vehicle, undocumented vessel, or aircraft which the buyer registers at an address located in the district.

    Please see publication 79, Documented Vessels and California Tax, publication 79-A, Aircraft and California Tax, and publication 34, Tax Tips for Motor Vehicle Dealers.

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  11. If I purchase property at a lower rate of tax, am I required to pay additional district tax if I use the property in a district with a higher tax rate?

    Yes. If the property is used in a district with a higher tax rate than the rate paid at the time of purchase, the additional tax is due. If you hold a seller’s permit, you are required to report and pay the additional business related use tax liabilities on your sales and use tax returns. If you do not have a seller’s permit with the BOE, you can report your purchase(s) subject to use tax on our website at www.boe.ca.gov by selecting New Registration, and then select Pay use tax, file and exemption, or request a tax clearance. You may also report and pay use tax to the Franchise Tax Board (FTB) on your California income tax return.

    For more information on use tax, please visit the California Use Tax Information webpage.

  12. If I am not located in a district and deliver property to my customer at my place of business, must I collect district use tax if the customer's billing address is located in a tax district?

    You do not owe district tax on a sale made to a district resident when you

    • Make the sale outside the district, and
    • Transfer possession or ownership of the merchandise outside the district.

    Exceptions: If you deliver the product into the district with your own vehicle, or participated in that district in making the sale, and are “engaged in business” in the district, (see FAQ #5), you must collect the district’s use tax.

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  13. As a retailer (dealer) of vehicles, aircraft, or undocumented vessels, what tax rate should I charge my customers?

    Retailers of certain vehicles, aircraft or undocumented vessels are considered “engaged in business” in districts in which the property is registered and are required to collect the applicable district use tax. Regulation 1823.5, Place of Delivery of Certain Vehicles, Aircraft, and Undocumented Vessels, relates to the place of delivery of certain vehicles (both commercial and non-commercial), aircraft, and undocumented vessels for the purpose of the district transactions (sales) tax portion only. It does not apply to the district use tax.

    • Declaration to relieve retailer of obligation to collect district transactions (sales) tax for sales of certain vehicles, vessels, and aircraft delivered to purchaser outside of the district. Regulation 1823.5, Place of Delivery of Certain Vehicles, Aircraft, and Undocumented Vessels, provides:
      • For the purposes of the (transactions) sales tax, not the use tax, retailer may be relieved of the obligation to collect the (transactions) sales tax, when you ship or deliver certain vehicles, vessels, or aircraft to a district imposing a district tax.

    You may not be liable for a district’s (transactions) sales tax on sales made when you accept a declaration in good faith as provided in Regulation 1823.5, Place of Delivery of Certain Vehicles, Aircraft, and Undocumented Vessels.

    If the purchaser issues a declaration to the seller and then the property is principally stored, used, or otherwise consumed in that district, the purchaser will be liable for and must pay the use tax.

    See publication 44, Tax Tips for District Taxes, publication 34, Tax Tips for Motor Vehicle Dealers, Regulation 1610, Vehicles, Vessels and Aircraft, Regulation 1566, Automobile Dealers and Sales Representatives, and Regulation 1669.5, Demonstration, Display, and Use of Property Held for Resale-Vehicles.

  14. As a retailer (dealer) of certain "commercial vehicles," what tax rate should I charge my customers?

    The tax rate applicable to certain “commercial vehicles” depends on the location where they are used. For the purposes of Regulation 1823.5, “commercial vehicle” means a vehicle required to be registered under the Vehicle Code, used or maintained for the transportation of persons for hire, compensation, or profit or designed, used, or maintained primarily for the transportation of property. Passenger vehicles which are not used for the transportation of persons for hire, compensation, or profit are not commercial vehicles.

    The place of use determines the tax rate regardless of the location of the property when it is first purchased. See publication 44, Tax Tips for District Taxes, and publication 34, Tax Tips for Motor Vehicle Dealers. Also, please see Regulation 1566, Automobile Dealers and Sales Representatives, Regulation 1669.5, Demonstration, Display, and Use of Property Held for Resale-Vehicles, and Regulation 1610, Vehicles, Vessels and Aircraft.

    You may not be liable for a district’s (transactions) sales tax on sales made under certain conditions.

    • When you accept a declaration in good faith as provided in Regulation 1823.5, Place of Delivery of Certain Vehicles, Aircraft, and Undocumented Vessels.

    For further assistance on sales or purchases of vehicles, vessels, and aircraft, please visit our website at, FAQ - Use Tax on Purchases of Vehicles, Vessels, Aircraft - Board of Equalization, for frequently asked questions, or call our Consumer Use Tax section at 1-916-445-9524.

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  15. As a purchaser am I responsible for reporting district taxes?

    As a purchaser, you are generally required to report district use tax on the purchase price of merchandise (tangible personal property) when:

    • You make first taxable use of the property in a district.
    • You purchased the property without tax or at a lesser rate of district tax than is imposed in the district of use.
    • Consumers in California owe use tax on purchases from out-of-state vendors when the out-of-state vendor is not registered to collect California tax, or for some other reason does not collect California tax.

    You may be eligible for a credit of tax paid to another district, but only up to the amount of tax due in the district of use.

    Consumers are liable to pay use tax on their purchases of vehicles, vessels, and aircraft from persons not required to hold a seller’s permit (from private, non retailer parties). The use tax rate is based on the location where they will be registered. The use tax rate applicable to vessels or aircraft depends on the location where they are moored or hangared. Please refer to publication 79, Documented Vessels and California Tax, publication 79-A, Aircraft and California Tax, publication 34, Tax Tips for Motor Vehicle Dealers, and Regulation 1610, Vehicles, Vessels and Aircraft. For additional information, please call our Consumer Use Tax section at 1-800- 400-7115.

  16. Fixed-price contracts and district taxes.

    To qualify as an exempt contract from district taxes, a “fixed-price contract” must meet the following conditions:

    • It must have been entered into before the effective date of the district tax.
    • Exception: A contract signed after the effective date qualifies if (1) it is based on a binding bid submitted before the effective date, and (2) it is signed before the bid can legally be changed.
    • Contracts for which an irrevocable (binding) bid was submitted prior to the effective date will qualify even when signed on or after that date provided they are signed during a period for which the bid is still irrevocable.
    • It must be for a fixed amount. A contract may not have any clauses which allow for increases or decreases in the contract price because of a change in the tax rates or the cost of the property to be furnished. This provision is not invalidated if the contract allows change orders. Change orders are considered separate contracts.
    • All parties must be bound by the terms of the contract.
    • No party can have the unconditional right to terminate the contract, whether or not that right is exercised.
    • The sales tax amount or rate must be specifically stated in the contract or the contract must state it is tax-included.

    Leases and construction contracts

    • Leases and fixed-price construction contracts may qualify for this district tax exemption.
    • A time-and-material construction contract does not qualify.

    Please refer to publication 9, Construction and Building Contractors, and publication 46, Tax Tips for Leasing of Tangible Personal Property in California.

    The exemption allowed for fixed-price contracts applies not only to sales of materials and fixtures under fixed-price construction contracts and to contracts for leases of tangible personal property but also to standard retail sales contracts. These publications can also be mailed to you by contacting our Customer Service Center at 1-800- 400-7115.

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