Hi, I’m Greg. Welcome to Collecting the
Right Amount of Tax. As a business owner making taxable sales in
or for use in California, you are responsible for collecting and paying the correct amount
of sales and use tax. It’s very important to know which sales are taxable so that
you can collect the right amount of tax. Generally, sales of items or goods are
taxable unless they’re specifically exempt. For example, sales of certain products,
like most food items at a grocery store are exempt from tax. So grocery stores
would not collect tax on their sales of fruit or most other cold foods.
But would, for example, collect tax on their sales of sodas, alcoholic
beverages, and other non-food items. There are other exemptions such as
for sales delivered out of state. Sales for resale are also not subject to tax.
To help you determine what’s taxable, visit our website and view our helpful
publications and industry guides. You can also call our customer
service center at 1-800-400-7115. Once you’ve determined which sales are
taxable, be sure to charge the correct tax rate. Sales and use tax rates vary
throughout the state. If you use a point-of-sale system or
computer software, make sure your system is programmed correctly.
For most sales, the tax rate is based on where the sale or delivery takes place.
For example, if you own several convenience stores you would charge the tax rate of the city or
county where the store making the sale is located. If you travel to different cities
or counties to make sales, such as at different craft shows throughout
the state, you need to charge the tax rate based on the location where you are selling.
If you’re a mobile food vendor and charge a tax included amount for
your menu items, you need to compute your tax included amount based on where you
park your truck or cart in the made sales even if you sold in different
cities or counties throughout the day. The CDTFA has an easy online tool you
can use to find the sales tax rate based on a specific California address. Sales
and use tax rates in cities and counties may change based on voter approval.
When this happens, the CDTFA posts a notice on its website and will also
notify registered sellers in that city or county and impacted or surrounding
area of any tax rate changes. The CDTFA will email tax rate updates
and other important notices to you. If you aren’t receiving email updates from us,
and you would like to, feel free to contact our 800 number to update your account.
Knowing the correct tax rate is important so you don’t over charge
or under charge your customers. If you overcharge a customer, you must refund
the money back to them or pay it to the CDTFA. You may not keep it. If you under
charge a customer you’re still responsible for paying the correct
amount of tax to the CDTFA. Some businesses that sell specific items may
also be required to collect certain fees. You must also pay these fees to the CDTFA
whether or not you charge your customer. Once you’ve collected the taxes and
fees, you need to accurately file your returns and pay the correct
amounts by the due date. To make it easier for you, you should
put the money you’ve collected into a separate business bank account,
so it’s available when it’s time for you to pay it to the CDTFA. You can learn
more about your responsibilities by exploring our website or
watching our other video guides. Thank you for doing business in California.