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EYE ON California Sales Taxes

By Jeff Meigs on Tue, Aug 25, 2015 @ 10:00 AM

eye_on_californiaLike most states, California imposes a sales tax on the sale of tangible personal property – but relatively few enumerated services. As you might expect, California is rather attractive for software companies; electronic downloads of software and cloud computing are not taxable in California.

California local sales and use taxes are administered by the state. That means, there is a single sales and use tax return filed for all state and local sales and use taxes – rather than having to file a separate return for each local jurisdiction.

Sales and use tax compliance made easy - right? Not so fast…

  • The combined state and local sales and use tax rate can reach 10% in California.

  • Registration for sales tax purposes can be exhausting in California – while listing a corporate officer and a social security number is standard in all states, California requires a list of all corporate officers, social security numbers and driver license numbers.

  • Prepayments of California sales tax are required of certain taxpayers as follows:

On written notification by the State Board of Equalization (SBE), any person whose estimated measure of tax liability averages $17,000 or more per month, must make the following prepayments:
(1) in the first, third and fourth calendar quarters, prepay not less than 90% of the state and local tax liability for each of the first two monthly periods of each quarterly period; and
(2) in the second calendar quarter, prepay a first prepayment of 90% of the total tax for the first monthly period of each quarterly period, and a second prepayment of either (a) 90% of the amount of such liability for the second monthly period of the quarterly period plus 90% of such liability for the first 15 days of the third monthly period of the quarterly period, or (b) 90% of the amount of state and local tax liability for the second monthly period plus 50% of 90% of the liability for the second monthly period. [Cal. Rev. & Tax. Cd. §6471(a).]

“Easy” – right? Wouldn’t you like to have heard Arnold S. explain this?

Do you want to learn more about what is taxable in California or how to know if you have created sales tax nexus?  (California has some specific rules around sales tax nexus and exhibiting at trade shows.)  Please leave a comment below to start the conversation.

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Stay tuned for more of Jeff's EYE ON series as he blogs about sales and use tax State by State.
Jeff Meigs

Written by Jeff Meigs