The official 'Visit California' website says “See a movie star. Sip a cocktail on a rooftop bar at sunset. Slip on a pair of designer shoes in an ultra-luxurious boutique in Beverly Hills. Play at Universal Studios...” and unless you happen to see the movie star while doing any of the other three, you will be paying the highest state sales tax of any state in the United State while doing them. While California maybe the land where you can ‘fuel your dreams’, it is also the place where the total of state, county and city sales taxes may consume as much as a dime out of every dollar you spend.
California is the most populous state (38,810,000 residents) in the United States, and the third largest (163,696 sq. miles) state by area (only Alaska and Texas are larger). 1 in every 8 U.S. residents live in California. Nearly 3 million acres in size, San Bernardino County is the largest county in the U.S. Los Angeles is the 2nd largest city in the United States, the San Francisco Bay Area is the 5th most populous area in the US. San Francisco bay is the largest landlocked harbor in the world.Otis Redding wrote “Sitting on the Dock of the Bay” on a houseboat in Sausalito. It was his last song and his greatest hit.
Despite its rich history in gold mining as well as the fields of golden poppies that are prevalent across the state in springtime, California’s nickname as “The Golden State” didn’t become official until 1968. Of course not everything in California is Hollywood or Silicon Valley, the state is the largest producer of fruit in the United States and also leads in the production of vegetables. Let us not forget that among those agricultural products, California produces more than 300,000 tons of grapes and 17 million gallons of wine per year.
Ever since the California Gold Rush began in 1848, the state has been a major component of our country’s economy. The Gold Rush was responsible for not only a huge economic boom in the state but led to dramatic social and demographic changes in part from the large-scale immigration that took place from both the eastern United State as well as foreign workers arriving migrating from the south and the Asia-Pacific rim via boat. Speaking of Gold, the Kennedy Mine in Jackson, California is the deepest mine in North American, and one of the richest gold mines in the world.
The Gold Rush is still seen as one symbol of California’s economic style of today including technology, entertainment and social fads which run from boom to bust. If California were a country of its own, rather than being just a state in the United States, it would have the 7th largest economy in the world. It is also the first state to ever reach a trillion-dollar economy in gross national product. California is regarded as a world center of the entertainment and music industries, of technology, engineering, and the aerospace industry.
California's geography is diverse, from the Sierra Nevada in the east to the Pacific Coast (3rd longest in the US) on the west, from the great Redwood forests of the northwest, to the Mojave Desert in the southeast.
California is home to both the highest (Mount Whitney) and lowest (Death Valley) points in the continental U.S., which happen to be within just 100 miles of one another.
About Sales Taxes and this series:
Thanks to Avalara, the 'tax people', this article is one in a 50 part series covering sales tax issues associated with each and every state tax jurisdiction in the United States. We have been publishing an article essentially every Tuesday this year, thus the series name "Sales Tax Tuesday".
Sales tax provides critical revenue for states. Other than property and income tax, sales tax is the largest source of tax revenue in the majority of the 46 states that collect it. From a government perspective, making sure every sales tax dollar is collected, through audits, fines, penalties rates and rules, is an exercise for income. It’s easy to be lured into a false sense of compliance when it comes to sales tax, this series is intended to insure that you are aware of the key sales tax facts for YOUR state.
Note: For sales tax definitions and essentials check out the opening article to this series.
Sales Tax Facts1:
- All business owners must register their business in California. Sales tax is charged on sales and leasing of tangible personal property; this includes wholesale sales.
- The California State Board of Equalization provides the website for electronic filing of California Sales and Use Tax.
- In California, retail sales of tangible items are generally subject to sales tax. Examples include furniture, giftware, toys, antiques and clothing. Some labor service and associated costs are subject to sales tax if they are involved in the creation or manufacturing of new personal property.
- Some items are exempt from sales and use tax, including sales of certain food products for human consumption (many groceries), sales of prescription medicine and certain medical devices and sales of items paid for with food stamps. Some sales are also nontaxable because the seller and/or purchaser meet certain criteria. A complete list is available in Sales and Use Tax: Exemptions and Exclusions (Publication 61).
- In some cases, retailers must report use tax rather than sales tax. 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 California are required to collect the use tax, whenever applicable, from the consumer, at the time of the sale.
- California has the highest state sales tax rate in the U.S. at 7.5%. With the addition of county and local taxes, the total combined sales tax rate can be as high as 10%.
- California is one of the “big four” of sales tax, along with Florida, New York and Texas. These four states are the most populous and have the highest sales tax revenue collections in the U.S.
- California is NOT a member of Streamlined Sales Tax (SST).
- California posts the top 500 sales tax delinquents on their website to shame them into compliance.
Did you know?
- An Oscar-worthy performance. A theater owner in California came up with the term “cornditioned” to convince tax auditors that he wasn’t the villain when it came to not collecting sales tax on popcorn. He argued that preparing and serving the popcorn was designed to dehumidify it, not heat it, and therefore didn’t fall under the definition of a taxable “hot prepared food.” How corny is that?
- Comparing apples to apples? In California, fresh fruit is tax free, unless you buy it out of a vending machine, in which case you’ll pay a 33% tax on it. "Mark that one up to 'technology', or perhaps it is 'taxology'."
- Get-it-to-go cold turkey. In California, takeout is typically tax free, unless the item is served hot. Get a cold sandwich and you’re out the door with some extra change. Get it heated or add gravy or melted cheese and you’ll have to pay sales tax. "Some like it cold, some like it hot!"
Manual sales and use tax management is prone to error and consumes staff time in pass-through rather than revenue-generating activities. Avalara provides solutions for sales tax automation, including tax calculation, exemption certificate management, returns processing and 1099 filing and reporting. Automation via Avalara allows businesses to be fully sales tax compliant without sacrificing productivity, or having to worry if the sandwich is hot or cold.
1 - State by State Sales Tax - California, Avalara - June 12, 2015.