You are an entrepreneur who lives in California. Whether you have a physical shop or selling products online or shipping products there– you must know about the sales tax in The Golden State. Read to on to know more about California Sales Tax for Business.
Taxable in California
Let’s start by identifying the things that are taxable for businesses in California. According to the California Department of Revenue, all tangible products or physical items are taxable. As well as some services. But sometimes, there are exemptions. To check the full list and info, you must head to their website here (http://www.taxes.ca.gov/)
Nexus in California
When you have a commercial connection or a business to a state, it’s called “Nexus”. You are obligated to collect sales tax in a state if you have a Nexus there.
In California, you have Nexus there if your business has any of the following in the state:
- Physical Location (store, office, warehouse, etc.)
- Online ads or links (on a California-based website or app) that generates sales, new customers,
- Person/s working for you (representative, sales agents, contractors, etc.)
- A significant amount of sales ($500,000 threshold in annual sales) within 12 months.
Sales Taxing in California
State-wide, the sales tax in California is 7.25 percent. However, it also has a destination-based sales tax system. That’s why you have to check it from the California Department of Revenue to ensure that you are taxing a buyer base on the address and location where it was bought.
Shipping cost in California is not applicable to sales tax. As long as the cost is clearly separated and listed from the price of the product/s.
Sales Tax registration in California
Registration for a sales tax permit is a must. Of course, it’s illegal to collect tax without it. It’s easy by the way. Just head to their website (https://www.cdtfa.ca.gov/services/) to follow the instructions. But before you do so, you must prepare the following:
- Personal Contact Info
- Business Contact Info
- Social security number or Employer Identification Number
- Business entity type.
- Bank account info.
Sales Tax Frequency in California
After registration for sales tax, the California Department of Revenue will assign a certain filing and paying frequency. It can be monthly, quarterly, and yearly depending on the amount of sales tax you collected in the state. The higher the amount the more frequent a business has to file.
To file taxes in California, there are three things to do:
- Calculate the sales tax amount.
- File the sales tax return.
- Make a payment.
The state also requires that you file a sales tax even if there is no tax to file or collected on your due date.
Other Important Sales Tax info in California
After registering for a sales tax permit, watch out for these three things:
- Penalties – Unable to file or pay in due date will incur monetary penalties.
- Discounts – There are cases or types of businesses that are eligible for tax discounts. Ask the California Department of Revenue about it.
- Holidays – During holidays, it is not required charged sales tax.
This article is a quick guide for Sales Tax in California, to check for more information head to the website of the California Department of Revenue (https://www.taxes.ca.gov/)
See also: HOW TO CALCULATE LANDED COST