Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Uniform Local Sales and Use Tax Annotations

700.0000 APPLICATION OF TAX—Regulation 1803

Annotation 700.0001

700.0001 Application of City Sales Tax. The sales tax is an excise tax levied for the privilege of conducting a retail business and is measured as a percentage of the gross receipts from sales. For sales tax to apply to sales of goods that are shipped from an out-of-state retailer to a California purchaser, two criteria must be met: (1) there must be participation in the sales by a previously-established sales office of the retailer in this state; and (2) the sale must take place in California.

Similar to criterion (2) above, a city can tax a selling activity only when that activity occurs within its borders. The fact that title may pass in a particular city does not give that city the power to tax the sale unless the retailer also exercises its privilege of selling within the city, i.e., the retailer maintains a place of sale there. A location cannot be considered a place of sale of the retailer under Regulation 1802 unless it can be issued a seller's permit. (Revenue and Taxation Code section 6066 et seq.) Regulation 1699(a) requires that for a location to be issued a permit, the place must be owned or controlled by the retailer at which clients customarily negotiate sales. A place where title passes thus does not qualify as a place of sale unless the sale is negotiated there.

The State sales tax laws are incorporated into the Local Tax Law. (Revenue and Taxation Code sections 7202(b) and 7203(a).) The local tax ordinances are subject to the same constraints to which the state is subject, plus they are subject to whatever limitations are provided in the state sales tax itself. A sales tax enacted by a city and/or county under the Bradley Burns Uniform Sales and Use Tax Law (local tax) may not be applied to a transaction that is subject to state use tax. If the sales at issue are subject to state sales tax, they are subject to local sales tax. If the sales are subject to state use tax, then local use tax applies. 6/14/02. (2003–2).