Tax Guide for Liquor Store Operators

Helping your business succeed is important to the Board of Equalization. Taxes you collect and pay to the state help fund state and local services and programs important to you and your community. We recognize that understanding tax issues related to your industry can be time-consuming and complicated, and want to help you get the information you need so you can focus on starting and growing your business.

To help you better understand the tax obligations specific to liquor store operators and owners, we have created this guide to tax issues and information important to your business.



How to Use This Guide

Liquor Store Operator

Each section of this guide contains information important to your business. The Industry Topics section covers many topics, each in an at-a-glance format that can be expanded to provide more extensive information if you need it.

The Getting Started section provides key resources related to registration, filing returns, account maintenance and other important information you need.

Lastly, the Resources section provides links to a wealth of information, including web-based seminars, forms and publications, statutory and regulatory information, and access to live help from our customer service representatives.

Please note that this information included is general in nature and is not intended to replace any law or regulation.



Liquor Store Operator

If You Need Help

If at any time you need assistance with topics included in this guide - or with others we may have not included - feel free to contact us by telephone or email for assistance. Contact information and hours of operation are available in the Resources section.

If you have suggestions for improving this guide, please contact us by email.

Getting Started

If you own a business in California, and you expect to be making taxable sales, you must register with us for a seller's permit and file regular sales and use tax returns. You may be required to register for other licenses or accounts. Using our online registration link below you can register for a seller’s permit and also obtain other necessary licenses or accounts. Listed below are other tax and fee programs that may be applicable to liquor stores.

Cigarette and Tobacco Products Licensing Act

You must register with us for a Cigarette and Tobacco Products Retailer License if you intend to sell cigarettes or tobacco products at retail. All new applications must be submitted with a one-time license fee of $100 for each retail location selling cigarettes or tobacco products. A license is valid for a 12-month period, is not assignable or transferable, and must be renewed annually at no additional cost, as long as it is renewed timely.

Cigarettes must have the California cigarette and tobacco products tax stamp affixed to each package.

For more information, download Publication 78, Sales of Cigarettes and Tobacco Products in California.

Registration

Online Registration — Register with us for your seller's permit and apply for any of the licenses, permits, or accounts listed above, or add a business location to an existing account.

If you have already registered with us, you'll find these tools helpful in maintaining your account.

Filing and Payments

Notice of Business Change — Keep your information current by using the links below and notifying us of any business changes.

Industry Topics

The Basics

Sales and Use Taxes In General

In California, all sales are taxable unless the law provides a specific exemption. In most cases, taxable sales are of tangible personal property, which the law defines as an item that can be seen, weighed, measured, felt, or touched.

For liquor stores, most taxable sales are going to be of beverages. However, you may also be required to collect sales tax on your sales of taxable food or periodicals, among other things.

If you consume or give away taxable items such as soda or alcoholic beverages that you purchased without paying sales tax, you owe an equivalent use tax – which is the same rate as sales tax – based on the cost of those items to you.

Seller's Permit

Most people who sell taxable items in California, even temporarily, must register with the BOE for a seller's permit. Registering for a seller's permit is free, although in some cases a security deposit may be required. If you have liquor stores in multiple locations, you must register each location with us. You can register with the Board of Equalization for a seller's permit or consolidated seller's permit using our online registration service.

Be sure to let us know about any changes to your business, or to your mailing or email address so that we can keep your records updated and inform you of important changes in law, tax rates, or procedure. You can easily update your account information by contacting our Customer Service Center or any one of our field offices throughout the state. Contact information is available in the Resources section of this guide.

Cigarettes and Tobacco Products

Cigarettes and Tobacco Products

Retail sellers of cigarettes and tobacco products must have a California Cigarette and Tobacco Products Retailer's License before purchasing or selling cigarettes or tobacco products. You must obtain this license in addition to your seller's permit.

  • You are required to have a license for each location from which cigarettes or tobacco products are sold.
  • If you purchase cigarettes or tobacco products from an out-of-state supplier who does not have a California Cigarette and Tobacco Products License, you must obtain a distributor's license.
  • If you purchase tax-paid cigarettes or tobacco products for resale, you must obtain a wholesaler's license.

You can apply online for a cigarette and tobacco products license using our online registration service or at any of the BOE's field offices. See the Resources tab for a link to our filed offices.

Transferring Product Between Stores

If you own more than one store and hold the necessary licenses for each location, you may be allowed to transfer cigarettes and tobacco products between stores. When transferring cigarettes and tobacco products, legible transfer records and copies of the original purchase invoice must be kept at each location involved in the transfer.

The transfer records must be prepared at the time of transfer and must include the address and tobacco license number of each store, the purchase invoice date, the purchase invoice number, the supplier's name on the invoice, the brand, type of packaging, flavor, and or style, and the amount of items transferred.

You must provide such documentation upon request by BOE staff or law enforcement.

For more information about licensing requirements for sellers of cigarettes and tobacco products, see BOE publication 78, Sales of Cigarettes and Tobacco Products in California. You may also attend a tobacco class for retailers or view our online tobacco seminar.

Cigarette Buy-Downs

If a cigarette manufacturer or distributor offers a "buy-down" promotion, where you agree to sell certain cigarettes at a reduced price and receive compensation from the manufacturer or distributor, sales tax applies to the total received from the customer plus any amount received from the manufacturer or distributor.

For more information, please see BOE publication 113, Coupons, Discounts, and Rebates, or Regulation 1671.1, Discounts, Coupons, Rebates, and other Incentives.

Sales

Taxable Sales

The list below is a summary of taxable items typically sold at liquor stores. It is not comprehensive. If you have questions about a product that is not included here, you may contact our Customer Service Center at 1-800-400-7115.


  • Alcoholic beverages
  • Carbonated water and soda
  • Ice
  • Tobacco Products
  • Most hot prepared food (see Hot Prepared Foods in this guide)
  • Non-prescription medicines
  • Books, newspapers, and magazines
  • Other non-food or beverage items such as automotive supplies, greeting cards, etc.

For more information, please see BOE publication 24, Liquor Stores.

Nontaxable Sales

The list below is a summary of nontaxable items typically sold at liquor stores. It is not comprehensive. If you have questions about a product that is not included here, you may contact our Customer Service Center at 1-800-400-7115.


  • Milk
  • Ice cream
  • Fruits and vegetables
  • Chips and crackers
  • Cold meats
  • Candy
  • Cold sandwiches sold to-go
  • Noncarbonated, nonalcoholic beverages such as water and juice.

For more information, please see BOE publication 24, Liquor Stores.

California Redemption Value (CRV)

Generally, if the beverage you sell is taxable, tax also applies to the separate charge for CRV. The amount subject to tax is the combined selling price of the beverage, the container, and the CRV.

If you are bottling, producing, importing or selling beverages in California, you may need to register with CalRecycle under the California Beverage Container Recycling and Litter Reduction Act. Contact the CalRecycle registration unit to register.

Note: The CRV program is administered by CalRecycle. Questions regarding the fee should be directed to them. This guide covers only how sales tax applies to CRV charges.

For more information about the CRV fee, visit the CalRecycle's Beverage Container Recycling page

Hot Prepared Foods

Heated food is usually taxable whether or not it is sold to-go or for consumption on your store premises.

A food product is hot when it is heated to above room temperature, and is still considered hot even after it has cooled, because it is intended to be sold in a heated condition.

Notable Exception: Hot Baked Goods

Hot baked goods, such as hot baked pretzels or croissants, sold to-go are exempt from sales tax. If sold in a combination package with hot prepared foods or with a hot beverage, however, the entire combination package is taxable. Hot baked goods purchased for consumption at your store are taxable.

For more information, see BOE publication 22, Dining and Beverage Industry.

Foods Heated in a Microwave Oven

If you sell a food product that is normally exempt from tax – such as a frozen burrito, the product may become taxable if it is heated in a microwave oven prior to the sale. The location of the microwave oven is the determining factor in whether the sale is subject to tax:


  • If the microwave is accessible to your customers, it is presumed that the food is not sold in a heated condition and that the microwave is being provided as a convenience to your customers, who may choose to heat the product.
  • If the microwave is behind the counter, it is presumed that the food is being sold in a heated condition, and is therefore taxable.

For more information, see BOE publication 22, Dining and Beverage Industry.

Combination Packages

When you sell two or more food items together in a package to-go for a single price, tax applies depending on the components of the package.

Including hot food or hot beverages with a combination package makes the entire package taxable.

If you sell a combination package to-go that includes cold food and a soda, the amount of the selling price of the soda is taxable.

Sales of food and beverages for your patrons to eat in your store are always taxable.

For more information, see BOE publication 22, Dining and Beverage Industry.

Newspapers and Magazines

Newspapers, magazines, and other periodicals you sell to your customers are taxable.

Newspapers, magazines, and other periodicals you provide without charge are not taxable. If you request payment or suggest a donation for such items, but do not require a payment or donation, you are considered to be providing the items without charge.

Manufacturer's Coupons, Rebates, and Other Promotions

If you accept discount coupons that allow your customers to purchase merchandise at a reduced price, tax is due on the amount you receive for the sale, plus any amount you receive from a third party as payment.

In cases where you offer your customers a store discount on taxable merchandise, you are not being paid by any third party. You owe tax only on the amount received from your customer.

A manufacturer's discount is one where you receive money from a manufacturer or other party as reimbursement. The amount you receive from a manufacturer or other third party as reimbursement for a discount is considered part of your gross receipts and is taxable, along with the amount you receive from your customer.

For more information, please see BOE publication 113, Coupons, Discounts, and Rebates.

Lottery Sales

Sales of tickets for California Lottery games are not taxable, and you should not include them on your sales and use tax return as part of your gross receipts.

Remember, it is important to keep your receipts for nontaxable sales – such as lottery tickets – separate from receipts for taxable sales.

Service Charges

Service charges you make to your customers for money orders and returned checks are not taxable.

You should not include service charges for money orders or returned checks on your sales and use tax return as part of your gross receipts.

Sales of Fixtures and Equipment

If you sell any fixtures or equipment used in your business, you should pay taxes on the selling price. Sales of fixtures and equipment you use are taxable even if they occur as part of the sale, reorganization, or closure of your business.

For more information, please see Regulation 1595, Sale of a Business – Business Reorganization.

Recording Your Sales Accurately

There are different ways of recording your sales. The two most common methods are key-ring and scanner. Retailers that use a scanner tend to have a lower rate of errors than retailers that use a key-ring method to ring up sales.

If you are using a scanner, be sure to program it so that items you sell are correctly scanning as taxable or nontaxable.

Sales Suppression Software Programs and Devices

Beginning January 1, 2014, it will be a crime for anyone to knowingly, sell, purchase, install, transfer or possess software programs or devices that are used to hide or remove sales and to falsify records.

Using these devices gives an unfair competitive advantage over business owners who comply with the law and pay their fair share of taxes and fees. Violators could face up to three years in county jail, fines of up to $10,000, and will be required to pay all illegally withheld taxes, including penalties and interest.

Purchases

Items Purchased for Resale

When you issue a resale certificate to purchase taxable items for resale, you don't pay sales tax at the time of purchase. Instead, sales tax applies when you sell the items at retail.

If you purchase an item with a resale certificate and use it, you owe a use tax – at the same rate as the sales tax at the location of use – to the BOE.

For more information, please see BOE publication 24, Liquor Stores.

Supplies, Equipment, and other Business Expenses

Items you purchase for use in your business (displays, advertising materials, bookkeeping and maintenance supplies, storage equipment, and refrigeration units, among others) are subject to tax at the time of purchase.

Normally such items are purchased from local suppliers who add and report sales tax. However, if you purchase equipment or supplies from an out-of-state seller, the sale is subject to use tax (see use tax below).

If the out-of-state seller does not charge California use tax, you should report the purchase price on your tax return (under "Purchases Subject to Use Tax").

Note: Wrapping and packaging supplies used to wrap merchandise or bags in which you place items sold to your customers may be purchased for resale. All other purchases of supplies, however, are generally subject to tax.

For more information, please see BOE publication 24, Liquor Stores.

Use tax

If you purchase taxable property without paying California tax and use the property for a purpose other than for resale, you owe a use tax. For example, if you issue a resale certificate to purchase soda but give it away or consume it, you owe use tax based on its purchase price.

The use tax rate is the same as the sales tax rate in effect at the location of use.

To pay use tax, report the purchase price of the taxable items under "Purchases Subject to Use Tax" on your sales and use tax return. Those purchases become part of the total amount that is subject to tax.

For more information, please see BOE publication 24, Liquor Stores.

Inventory Controls

Inventory Controls

Keeping good books and records will help you detect any losses early. We strongly recommend that you:


  • Keep records of all merchandise removed from inventory.
  • Keep accurate and complete records of sales and purchases.
  • Take a physical inventory at least once a year.
  • In the period between inventories, compute the cost of merchandise sold, add the expected percentage of mark-up, and deduct discounts for the period of time involved. Your computed figure should be very close to the sales made for the same period the prior year.
  • Ensure that your records of purchases for resale are accurate and complete and do not include supplies or other items not for resale.

Common Inventory Losses

Keep your eye out for the following types of losses:

  • Money pocketed by employees and covered up by not ringing up the sale or ringing it up at a lesser amount.
  • Merchandise stolen by employees, clean-up crews, or other persons with access to the store.
  • Short deliveries or theft by delivery persons.
  • Shoplifting by customers.

Note: thefts of cash are not deductible for sales tax purposes because tax is measured by sales.

For more information, please see BOE publication 24, Liquor Stores.

Resources

Need to know more? Follow the links below for more information about the topics covered in this guide, as well as other information you might find helpful:

Top Three Resources

Related Publications and Regulations

Publications

Regulations

Related Websites

Other Helpful Resources

  • Sign Up for BOE Updates — Subscribe to our email lists and receive the latest news, newsletters, tax and fee updates, public meeting agendas, and other announcements.
  • Videos and How-To Guides — These resources will help you avoid common mistakes, file your tax returns online, and more.
  • City and County Tax Rates — A listing of current and historical tax rates.
  • Special Notices — BOE special notices are issued whenever there is a change in law, tax rates, or BOE procedures.
  • BOE Online Services — Learn about the online services BOE offers.
  • Verify a Permit or License — You can use this application to verify a seller's permit, Cigarette and Tobacco product retailer license, eWaste account, or Underground Storage Tank Maintenance Fee Account.
  • BOE Field Offices — A comprehensive listing of all BOE field offices and contact information.
  • Find Your Board Member — You can use this application to quickly identify your elected BOE representative.
  • Get It In Writing! — The Sales and Use Tax Law can be complex, and you are encouraged to put your tax questions in writing.
  • Contact Us — A listing of BOE contacts for your questions and concerns.
  • Customer Service Center — You can also call our Customer Service Center at 1- 800-400-7115 8 a.m. to 5 p.m. Monday through Friday except state holidays to get answers to many of your questions.