If You Are a Retailer or Purchase Goods Subject to Sales or Use Tax
You will be reporting taxes to the State Board of Equalization (BOE) on a regular basis. The links below give you a brief overview of your tax obligations. If after reading this information you still have questions, please contact us. You may also wish to read some of our online publications regarding specific types of businesses. For additional information, see BOE's Forms and Publications.
- Sales and Use Taxes - What Is Taxable?
- Resale Certificates
- District Taxes
- How to Register With BOE
- Applying for a Seller's Permit
- Temporary Permits
- Other BOE Administered Tax and Fee Programs (Property and Special Taxes)
- Additional Requirements for Your Business
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 and clothing. 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 report use tax, rather than sales tax, to the BOE. 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 the sale.
The tax rate for sales tax and use tax is the same.
Some sales and purchases are exempt from sales and use tax. Examples of exempt sales include, but are not limited to, sales of certain food products for human consumption, sales to the U.S. Government and sales of prescription medicine.
For a more detailed explanation of what is taxable, please see Applying Tax to Your Sales and Purchases and Your California Seller's Permit, (Publication 73). For more information on exempt sales, please see Nonprofit/Exempt Organizations.
If you purchase tangible personal property for resale, the transaction is not subject to sales or use tax provided the sale is properly documented. As a result, your supplier will ask you to provide a resale certificate to document that the property was purchased for resale. As explained below, the certificate must be taken in good faith and on a timely basis, and it must include specific information.
As a seller, you may also accept resale certificates from other sellers who wish to purchase tangible personal property from you for resale purposes.
The certificate may be in any form, such as a note, letter or memorandum. However, the certificate must contain the following information:
- The name and address of the purchaser.
- The number of the seller's permit held by the purchaser (if the purchaser is not required to have a seller's permit, see note below).
- A description of the property to be purchased.
- A statement that the described property is being purchased for resale. The certificate must contain words that state the property will be resold or is for resale. The use of words such as nontaxable or exempt or similar terms is not acceptable.
- The date of the document.
- The signature of the purchaser or someone approved to act on his or her behalf.
The Board of Equalization does not furnish resale certificate forms. However, certificates are available in many office supply and stationery stores (you should ensure that the certificates are designed to provide the required information noted above). A BOE-approved resale certificate may be taken from Sales for Resale (Regulation 1668).
You must report your total gross sales for the reporting period on your sales and use tax return. If your total sales include amounts you received from sales for resale, you should take a deduction for those amounts on the line set aside for sales to other retailers for purposes of resale. If you don't take the deduction, you'll pay more tax than you owe. If you make any use of property you purchased for resale other than demonstration or display, your property is not considered purchased for resale and you owe tax on its cost. You should retain resale certificates in your records to support all of your sales for resale.
For more information, please see Sales for Resale (Publication 103).
Note: Some businesses are not required to hold a seller's permit (for example, a business may not make sales in this state or it may not sell property that is subject to sales tax when sold at retail). If you are selling to a purchaser who is not required to hold a seller's permit but who wishes to make a purchase using a resale certificate, the purchaser must indicate on the certificate that he or she does not hold a seller's permit and why a permit is not required.
The sales and use tax rate is not the same in all California locations. While the standard statewide rate is currently 7.25 percent, the total sales and use tax rate is higher in areas where there are voter-approved special transactions (sales) and use tax districts. In those districts, the total tax rate includes the standard statewide tax rate plus the district tax rate, which varies from district to district. You must report district taxes on Schedule A of your sales and use tax return.
Determining where district taxes are in effect:
California City and County Sales and Use Tax Rates includes information on special tax districts and lists tax rates for all California cities and counties. Tax rates are also found on BOE's website and FaxBack system (call toll-free 800-400-7115). If the rate listed for a city or county is higher than 7.25 percent, that city or county is in a special tax district. While most special tax districts cover entire counties, some are limited to specific cities. There may be more than one district tax in effect in a specific location.
When you sell or lease merchandise, vehicles, or other tangible personal property in California, even temporarily, you are generally required to register with the BOE and to pay sales tax on your taxable sales. When you register, you will be issued a seller's permit, sometimes mistakenly called a resale number or resale permit. A seller's permit is a state license that allows you to sell items at the wholesale or retail level and to issue resale certificates to suppliers. You cannot legally make sales of taxable products in California until you are issued a seller's permit. The requirement to obtain a seller's permit applies to individuals as well as corporations, firms, partnerships, and so forth. Both wholesalers and retailers must apply for a permit. As a permit holder, you are required to:
- Report and pay sales and use taxes
- Keep adequate records
You must report and pay sales tax on each taxable sale. At the time you make the sale, you may collect from your customer an amount equal to the tax you will owe.
As a registered seller, you will need to take the time to learn how to properly apply the sales and use tax law in your business operations. And you must keep adequate records that document your sales and purchases.
You are also required to notify the BOE if you:
- Change your business or mailing address
- Change the ownership of your business
- Sell your business
- Buy another business
- Discontinue your business
For a more detailed explanation of your tax obligations, please see Do You Need a California Seller's Permit? (Publication 107), Your California Seller's Permit (Publication 73) and Closing Out Your Seller's Permit (Publication 74).
You may obtain a seller's permit application (BOE-400 series) from the BOE website or call our Information Center at (800) 400-7115. Representatives at our Information Center are available to assist you with permit registration questions Monday through Friday (except State holidays) from 8 a.m. to 5 p.m. If you are hearing-impaired, you may call:
From TDD phones: 800) 735-2929
From voice phones:(800) 735-2922
The Information Center can fax the application to you within 24 hours or put it in the mail by the second business day following your call. Please be sure to fully complete the application, sign it, and mail it to the BOE along with copies of any requested documents. Or, if you prefer, you can apply in person at the nearest BOE office.
You will be asked to furnish:
- Your social security number (corporate officers excluded).
- A photocopy of your driver license to ensure the accuracy of the information provided and to protect against fraudulent use of your identification numbers.
- The name and location of banks where you have an account.
- Names and addresses of suppliers.
- Name and address of bookkeeper or accountant.
- Names and addresses of two personal references.
- Anticipated average monthly sales and the amount of those sales which are taxable.
Additional information may be required.
If you have partners, or if your business is managed by corporate officers or limited liability company managers, members, or officers, those persons will also be asked to furnish some of the information listed above.
If you purchased your business, you'll need to provide the previous owner's name and seller's permit number. To make sure that you won't have to pay any sales or use tax owed by the previous owner, you should request a tax clearance from the BOE before you buy.
There is no charge for a seller's permit. However, depending on the type of business and anticipated taxable sales, we may ask you for a security deposit.
If you apply by mail, you will usually get your permit within 7 to 14 days. If you apply in person, the field office may be able to issue your permit the same day. If you need to obtain your permit in less than 14 days, we recommend that you apply in person.
If you make sales of a temporary nature (such as Christmas tree sales or sales at craft fairs), you may apply for a temporary seller's permit. Temporary permits are issued to those whose sales activity will last no longer than 30 days. Please refer to Obtaining a Seller's Permit page for more information on Temporary Permits.
The BOE administers several taxes and fees in addition to the state's sales and use taxes. The following list includes some of the other tax and fee programs we administer and describes who is generally required to register. For further information or to register for a particular program, please call the BOE Information Center at (800) 400-7115.
For a listing of all tax and fee programs administered by the BOE, please read Guide to Board of Equalization Services, (Publication 51). You may also visit the BOE website to view the publications we have available regarding Special Taxes.
- Environmental Fees
- Excise Taxes
- Fuel Taxes
- Private Railroad Car Tax
- State Assessed Property Tax
- Timber Yield Tax
The state and federal governments have additional requirements for businesses. Certain businesses are required to obtain permits from the California Department of Consumer Affairs and state and local environmental agencies. You will probably need to obtain a business license or other permits from the county or city where you operate.
California's Environmental Protection Agency (CalEPA) offers extensive local, state, and federal business permit information on the Calgold website at www.calgold.ca.gov. Chambers of commerce, economic development organizations, and other business organizations are other good sources of information. Often the city or county business licensing department can assist you, too. Some counties and cities publish special guides for small businesses, available free or at a low cost.