Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2016
Sales And Use Tax Law
ANALYSIS OF THE CALIFORNIA SALES AND USE TAX LAW
Nature and rate of sales and use taxes
The sales tax is imposed on retailers for the privilege of selling tangible personal property at retail. The use tax is imposed upon the storage, use or other consumption in this state of tangible personal property purchased from a retailer. The use tax, except as to leases, is not imposed on gross receipts from the sale of property which were included in the measure of the sales tax. The use tax rather than the sales tax applies to purchases shipped from an out-of-state point to a California consumer. The obligation to pay use tax is on the consumer. However, if an out-of-state retailer is engaged in business in this state, it is required to collect the use tax from the consumer at the time of making the sale.
The sales tax is measured by gross receipts from retail sales. The use tax is measured by the sales price of the property. The state tax rate is the same for both taxes, and is 5.5% as of January 1, 2013. "Gross receipts" and "sales price" mean the total amount of the sale or lease, including all receipts, cash, credits and property of any kind or nature but not including the amount of any tax (except manufacturers' or importers' excise tax) imposed by the United States upon or with respect to retail sales and not including the amount of any tax imposed by the state upon diesel fuel, or the amount of any transactions or sales tax or use tax imposed by any city, county or city and county or special taxing district within this state. "Gross receipts" and "sales price" also do not include 1) amounts charged for the value of intangible personal property in certain technology transfer agreements, 2) certain charges for transporting landfill, and 3) amounts equal to the sales or use tax on the federal manufacturers' or importers' excise tax imposed on specified fuel purchases under certain conditions.
The granting of possession of tangible personal property by a lessor to a lessee is a continuing sale in this state, and the possession of such property by a lessee is a continuing purchase for use in this state. The tax is collected by the lessor at the time of each payment pursuant to the lease. Leases are not sales if the property involved consists of motion picture and television films or tapes, certain linen supplies and similar articles, certain household furnishings and certain mobile transportation equipment with the exception of chemical toilet units and videocassettes, videotapes, and videodiscs for private use, and leases of property in substantially the same form as acquired by the lessor on which the lessor has paid use tax or sales tax reimbursement are not subject to tax. "Lease" does not include a use of tangible personal property for a period of less than one day for a charge of less than twenty dollars ($20) when the privilege to use the property is restricted to use thereof on the premises or at a business location of the grantor of the privilege.
"Sale" and "purchase" do not include:
(a) Certain transfers of printing materials.
(b) Certain furnishing (without transferring title) of motion picture equipment by a motion picture production partnership to its members.
(c) Certain leases or transfers of title to tangible personal property when approved by the California Alternative Energy and Advanced Transportation Financing Authority.
(d) Certain transfers of custom computer programs other than basic operational programs.
(e) Certain transfers of title to, and transfers of title and leases by, the California Pollution Control Financing Authority.
(f) Certain transfers of qualified mass commuting vehicles pursuant to safe harbor leases.
(g) Certain transfers of qualified motion pictures, as defined and the performance of qualified production services as defined.
(h) Certain transfers of title to, or lease of, tangible personal property pursuant to an acquisition sale and leaseback.
(i) Certain trades or exchanges of endangered and threatened animal and plant species.
(j) Certain transfers of original drawings, sketches, illustrations, or paintings by an artist or designer at social gatherings, under specified circumstances.
(k) Certain transfers of animals to individuals for use as pets and any related service charges, when the transfer is made by a nonprofit animal welfare organization or a local government animal shelter.
Under certain circumstances, the retailer may take a deduction for accounts which become worthless. Credit is allowable against the use tax for sales or use tax paid in another state on account of the purchase or use of the property in that state.