Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2014
 

Analysis of the Transactions And Use Tax Law

Districts imposing taxes. 43 counties, 106 cities, and one town in California impose transactions and use taxes in conformity with the Transactions and Use Tax Law under the various conditions imposed by the applicable provisions of the Public Utilities Code.

Rate of tax. Unless the principal act of the district provides for a different rate, the rate of the transactions and use taxes is fixed at one-eighth, one-quarter, one-half, or three-quarters of 1 percent of the sales price of tangible personal property sold at retail in the district, or purchased outside the district for use in the district. A credit is allowed against the district use tax for transactions tax reimbursement paid in another district.

Provisions of State Sales and Use Tax Law incorporated. The ordinance imposing the tax must include provisions identical to those of the State Sales and Use Tax Law the rate of tax and substitution of the name of the district as the taxing agency in place of the state.

Provisions similar to the Uniform Local Sales and Use Tax Law. The tax base is generally the same as the base for uniform local sales and use taxes imposed under Part 1.5 of Division 2 of the Revenue and Taxation Code, except that transactions and use taxes do not apply to the sale, lease, use, etc. of tangible personal property furnished for a price fixed pursuant to a contract entered into prior to the operative date of the district tax, or of property delivered outside the district, and the obligation to collect district use tax is limited to retailers engaged in business within the district. The state and uniform local use tax must be collected by retailers engaged in business anywhere in the state.

Administration. The district is required to contract with the State Board of Equalization to perform all functions in the administration and operation of the ordinance imposing the tax.

Disposition of proceeds. All taxes collected by the board under contract with the districts shall be transmitted to the districts.

Presumption—place of sale. As in the Uniform Local Sales and Use Tax Law, the Transactions and Use Tax Law provides that all retail sales are made at the place of business of the retailer unless the property is delivered by the retailer, his agent, or by a common carrier to an out-of-state destination.

Exemptions:

1. Tax paid in another district. A person subject to a district use tax is entitled to a credit against the tax for a transactions tax paid under any state-administered transactions and use taxes ordinance (Sec. 7262(a)(4)).

2. Aircraft common carriers. Transactions tax does not apply to sales of property to operators of aircraft when the property is to be used or consumed principally outside the county of sale and directly and exclusively in the carriage of persons or property directly and exclusively in the use of the aircraft as common carriers of persons or property under the authority of the laws of California, the United States, or any foreign government. Use tax does not apply when property purchased by operators of aircraft is used or consumed by them directly and exclusively in the carriage of persons or property directly and exclusively in the use of the aircraft as common carriers of persons or property for hire or compensation under a certificate of public convenience and necessity issued pursuant to the laws of California, the United States, or any foreign government.

3. Property furnished pursuant to contract. There are exempted from tax the sale, lease or use of property if the property is sold, leased or purchased for a fixed price obligated under a contract entered into prior to the operative date of the ordinance (Secs. 7261(a)(7) and 7262(a)(6)).

4. State exemptions incorporated. Exemptions contained in the State Sales and Use Tax Law are incorporated into the transactions and use tax ordinances with the exception of the sale or use of property purchased by certain new businesses for use in manufacturing and related activities. Such sales or uses are subject to all applicable transactions and use taxes.