Background
Voter-approved Proposition 30, The Schools and Local Public Safety Protection Act of 2012, which imposed the one quarter of one percent (0.25 percent) temporary statewide sales and use tax rate expires on December 31, 2016. As a result, effective January 1, 2017, the California statewide sales and use tax rate will decrease by 0.25 percent from the current rate of 7.50 percent to the new rate of 7.25 percent. However, the total tax rate in many cities and counties will remain higher than the statewide rate because of local voter-approved district taxes in those areas.
Retailers Responsible for Charging the Correct Tax Rate
For retail transactions on or after January 1, 2017, retailers may charge their customers for tax reimbursement at the statewide sales and use tax rate of 7.25 percent, plus any applicable district taxes. Likewise, purchases that are subject to use tax on or after January 1, 2017, are subject to the 7.25 percent rate plus any applicable district taxes.
To find the full tax rate in your city or county, go to the Find a Sales and Use Tax Rate webpage and enter the address as prompted. (Please note that the 0.25 percent statewide tax rate decrease will not be reflected on this website until January 1, 2017). For additional information on the sales and use tax rates, you may also visit the California City and County Sales, and Use Tax Rates webpage. For more information on district taxes, please see publication 44 (PDF), District Taxes (Sales and Use Taxes).
If a Retailer Charges an Incorrect Tax Rate
A retailer who continues to charge and collect the higher statewide sales and use tax rate after January 1, 2017, must either refund the excess tax collected to their customer or pay the excess tax. If the excess tax collected has been paid, the retailer may request a refund on behalf of their customer by completing form CDTFA-101, Claim for Refund or Credit. For information regarding filing a claim for refund on tax overpaid, please see publication 117, Filing a Claim for Refund.
Merchandise Delivered after January 1, 2017
The applicable sales and use tax rate is the rate that is in effect at the time the sale occurs. Generally, the sale occurs when the merchandise is delivered to the customer, unless the sales contract specifically states that title to the merchandise passes to the customer prior to delivery.
Therefore, if the sales contract does not specify when title passes, most retail sales of merchandise delivered to customers on and after January 1, 2017, will be subject to the new tax rate of 7.25 percent plus any applicable district taxes. For additional information regarding when a sale occurs, please see Regulation 1628, Transportation Charges.
Returned Merchandise
The customer should be refunded the amount of tax at the rate that was charged and collected from the customer at the time of the original sale.
Fixed-Price Contracts
The statewide sales and use tax 0.25 percent rate decrease applies to all taxable sales and purchases made as part of a fixed-price contract or fixed-price lease agreement (other than certain leases of mobile transportation equipment) that were entered into prior to January 1, 2017. The decreased rate replaces the rate in effect at the time you first entered the fixed-price contract or fixed-price lease agreement.
Exception for Leases of Mobile Transportation Equipment (MTE)
Lessors of MTE who elect to pay their use tax liability measured by the fair rental value (FRV) of MTE must pay tax at the rate in effect at the time the equipment was first leased. The rate remains the same for all periods during which the equipment was leased, including during any period in which the statewide base sales and use tax rate increased or decreased. Therefore, the 0.25 percent decrease does not apply to MTE that is first leased prior to January 1, 2017, and the lessor reports the lease receipts based on FRV.
More Information
For more information visit the California Department of Tax and Fee Administration (CDTFA) website.
The CA State Board of Equalization provides a sales tax rate area lookup online at BOE Maps.