Publication 44, District Taxes (Sales and Use Taxes)
Sales Across District Lines

This section is for businesses located in a district that make sales to customers located outside the district. This section may be useful if you purchase property that you intend to store, use, or consume in a district. It also includes a general outline of the application of district tax to these types of sales and purchases.

If you have questions about particular sales or purchases, please call our Customer Service Center or contact one of our offices.

This section discusses the general rules covering the application of district tax to these kinds of transactions and then discusses the responsibilities of retailers and purchasers for reporting and paying the tax.

Property sold in a district which is delivered or first used in that district

If your business is located in a district, your sales are generally subject to transactions (sales) tax when you deliver the property to the purchaser in the district. The transactions (sales) tax applies even if the purchaser intends to immediately transport and use the property outside the district.

Please note: You are liable for your district’s tax if you deliver the property outside the district with the knowledge that the purchaser will store, use, or consume the property in your district.

Property delivered to another district

District use tax is due on property where the customer first stores, uses, or otherwise consumes in a district.

A customer who is liable for district use tax on property first used in a district is allowed a credit for any transactions (sales) tax reimbursement already paid. This credit is limited to the amount of transactions (sales) tax reimbursement paid by the customer in the district of origin. That is, a refund of district tax is not available if the tax owed in the district of first use is less than the transactions (sales) tax reimbursement already paid on the purchase. (For an example of how the credit applies, see Purchasers.)

For example, your business is located in a district, and you sell merchandise to a customer who is located in an area where there is no district tax imposed. If your customer picks up the merchandise at your location, the sale is subject to your district’s tax, even if your customer intends to take the merchandise back to their location. On the other hand, if you ship the property to the purchaser’s location, the sale is generally not subject to your district’s transactions (sales) tax. However, you, as the retailer, are required to collect the district’s use tax if you are engaged in business in the district to which you ship the merchandise.

Either the retailer or purchaser may be responsible for reporting district use tax to us, depending on the circumstances of the sale or use of the property, as discussed in the following sections.

Retailers

As a retailer, you are required to collect and report district use tax on a sale in a district where you are engaged in business (see What does "engaged in business" in a district mean?), and one of the following conditions applies:

You ship or deliver the property into the district.
You participate in the sale of the property within that district. "Participation" includes solicitation, whether direct or indirect. It also includes receipt of orders at a place of business in the district or through any representative, agent, canvasser, solicitor, subsidiary, or any other person working in the district under your authority.
You are a licensed dealer of vehicles or undocumented vessels that are registered by the purchaser in a county with district taxes.

If a sale meets these conditions, you must collect district use tax on all taxable charges, including those taxable charges which result from repairs or reconditioning.

The following illustrates when retailers should collect and report district use tax:

Example: A retailer in Santa Clara County makes a taxable sale of property that is delivered to and used by the purchaser in unincorporated Alameda County. Even though it is subject to the general sales tax, the sale would be exempt from Santa Clara County district taxes because the property was delivered according to the contract of sale outside the county for use outside the county. However, use of the property in Alameda County makes the sale subject to the district use tax in Alameda County. If the retailer is engaged in business in Alameda County and ships or delivers the property within Alameda County, they are responsible for collecting and reporting all applicable countywide district use taxes on his or her sales. If the retailer is not engaged in business in the county, the purchaser is generally responsible for reporting and paying district use tax on his or her purchases.

Purchasers

As a purchaser, you are generally required to report and pay district use tax on the purchase price of tangible personal property when:

You make the first taxable use of the property in a district.
You purchased the property without district tax or at a lesser rate of district tax than is imposed in the district of use.
The retailer has no obligation to collect and report the tax.

As stated above, you are eligible for a credit of tax paid to another district, but only up to the amount of tax due in the district of use.

Application of this credit is illustrated by the following:

Example: A consumer buys merchandise and pays district tax of 1.00 percent. The consumer then first uses the property in another location where the district tax rate is 0.50 percent. The consumer is liable for the district use tax at the 0.50 percent rate but is eligible for a credit based on the transactions (sales) tax of 1.00 percent paid to the other district. However, no refund is allowed for the additional 0.50 percent district tax paid on the purchase.

Please note: Certain cities within counties may have higher rates due to citywide district taxes.

If the consumer buys merchandise in a location and pays district tax of 0.50 percent and then first uses it in another location where the district tax rate is 1.00 percent, they are liable for the district use tax of 1.00 percent. The consumer is allowed a credit for the 0.50 percent district tax paid but owes the additional 0.50 percent district tax due in the location where the property was first used.

Declaration to relieve retailers of obligation to collect district use tax for sales delivered to purchaser outside of the district

For the purposes of the district use tax, not the transactions (sales) tax, you, as a retailer, may be relieved of the obligation to collect the district use tax (other than for vehicles, aircraft, and vessels) imposed by that district when you ship or deliver tangible personal property outside of that district to a purchaser’s principal residence address or principal business address, per Regulation 1823.4, Place of Delivery of Tangible Personal Property Generally. You are relieved of the obligation by accepting, in good faith, a properly executed declaration under penalty of perjury from the buyer. The declaration must:

Be signed by the buyer,
State that such address is, in fact, the buyer’s principal place of residence or principal place of business,
State where the buyer’s principal place of residence or principal place of business is located outside the boundaries of the district,
State that the property was purchased for use at a designated point or points outside of that district, and
State that the purchaser will be liable for and pay the use tax if the property is principally stored, used, or otherwise consumed within a district.

For example, you are a retailer required to collect district use tax on property you ship to a city, which has a tax rate of 8.25 percent. The county where your business is located and the city you ship to have the same zip code. The county, however, has a tax rate of 8.00 percent. Customers living in the county near your business location, but not within the city limits, are not subject to the 8.25 percent tax rate, but the 8.00 percent rate for the county is applicable. If your customer provides a declaration as provided in Regulation 1823.4, you may charge them the 8.00 percent tax rate.

For an example of the declaration to relieve the retailer of the obligation to collect district use tax, see Sample Declaration (Regulation 1823.4). There is also a sample declaration that may be used in Regulation 1823.4, Place of Delivery of Tangible Personal Property Generally.

Please note: Even though this example shows tax calculated at a rate of 8.00 percent, you should use the rate in effect where the property is being delivered. For more information, see California City & County Sales & Use Tax Rates.

Declaration to relieve retailers of the obligation to collect transactions (sales) tax for sales of certain vehicles, aircraft, and undocumented vessels when delivered to purchaser outside of the district

If you register a vehicle or vessel with the California Department of Motor Vehicles (DMV) to an address within a tax district, the district tax is generally included as part of the total tax collected.

A retailer of certain vehicles, aircraft, and undocumented vessels is considered engaged in business in any district imposing district tax and is generally required to collect the district tax and pay it to the state if the vehicle, aircraft, or undocumented vessel is licensed or registered in any district imposing a district tax.

Regulation 1823.5, Place of Delivery of Certain Vehicles, Aircraft and Undocumented Vessels, relates to the place of delivery of certain vehicles (both commercial and noncommercial), aircraft, and undocumented vessels for the purpose of the transactions (sales) tax portion only. It does not apply to the district use tax.

Regulation 1823.5 defines the type of vehicles, aircraft, and undocumented vessels that, under certain circumstances, qualify for a transactions (sales) tax exemption. As stated above, this regulation also applies to certain commercial vehicles. The regulation includes declarations for the purpose of allowing the seller to treat the sale as exempt from the transactions (sales) tax. The declarations are made under penalty of perjury. If the purchaser issues a declaration to the seller and then the property is principally stored, used, or otherwise consumed in that district, the purchaser will owe the district use tax. Even though the sale of the vehicle, aircraft, or undocumented vessel may be exempt from the transactions (sales) tax under this regulation, the statewide rate (currently 7.25 percent) will still apply to the sale, and the retailer may still be responsible for collecting the district use tax.

Please note: You should use the rate in effect at the vehicle, aircraft, or undocumented vessel’s registration location. For current tax rates, see California City & County Sales & Use Tax Rates.

Any seller claiming an exemption under this regulation must retain these declarations executed in the prescribed form according to Regulation 1823.5(e). If the exemption claimed relates to the sale of a vehicle, the seller must also retain in their records a copy of either the DMV report of sale or other documentary evidence showing the out-of-district address to which the vehicle is registered.

An undocumented vessel is a vessel that is required to be registered with DMV. Purchasers of undocumented vessels that are exempt from transactions (sales) tax under Regulation 1823.5 shall pay district use tax to DMV at the time of registering the vessel if the seller did not collect the use tax. As discussed above, the seller may be required to collect the district use tax and pay it to the state. A documented vessel means a vessel that is required to be documented by the United States Coast Guard and for which the United States Coast Guard has issued a valid marine certificate. If you have questions about whether your vessel qualifies as documented or undocumented, please refer to publication 40, Watercraft Industry.

Delivery outside district

Any seller claiming an exemption from the district tax under Regulation 1823.5 must retain a declaration signed under penalty of perjury in the form prescribed in the regulation. The declaration must be signed by the buyer, accepted by the seller in good faith, and include a written statement where the vehicle, aircraft, or undocumented vessel was purchased for use at designated points outside the district. If the claimed exemption relates to the sale of a vehicle, the seller also must retain in his records a copy of either the DMV report of sale or other documentary evidence showing the out-of-district address to which the vehicle is registered.

Regulation 1823.5 includes sample declarations that can be used to relieve the retailer of the obligation to collect transactions (sales) tax. For examples of the declarations, see Sample Declaration (Regulation 1823.5), Place of Delivery of Certain Vehicles, Aircraft and Undocumented Vessels, and Sample Declaration (Regulation 1823.5), Commercial Vehicles.

For additional information regarding sales or purchases of vehicles, vessels, and aircraft, please visit our frequently asked questions, or call our Consumer Use Tax Section at 1-916-445-9524.

Sales across district lines—Examples

Am I liable for transactions (sales) tax in a district where I solicit and accept a sale when the property is never physically in the district?

No. Under these circumstances, you are not liable for transactions (sales) taxes. District tax law allows a specific exemption for property sold within a district but delivered according to the contract of sale outside the district and used outside the district. You may be responsible for district use tax in the district where the property is delivered.

If I am located in a district, am I liable for my district’s tax on a sale to a person located outside the district?

You are generally not liable for your district’s tax on a sale as long as the customer does not take possession of the property in your district. However, if your customer is located in another district, you are generally liable for that district’s use tax if:

You are engaged in business in that district, and
You ship or deliver the property into that district or you participate in the sale of the property within that district.

If I purchase property at a lower tax rate, am I required to pay additional district use tax if I use the property in a district with a higher tax rate?

Yes. If the property is used in a district with a higher tax rate than the rate paid at the time of purchase, the additional district use tax is generally due.

If I am not located in a district and deliver property to my customer at my place of business, must I collect district use tax if the customer’s billing address is located in a tax district?

No. You would be required to collect the district use tax only if you are engaged in business in the district and participated in making the sale in the district or delivered or shipped the property into the district. An exception is that retailers of vehicles or undocumented vessels are always engaged in business in districts where the property is registered and, therefore, are always required to collect district use tax.

If I am a retailer located outside a district and I regularly make deliveries to customers in a district, am I required to report district use tax?

If you make deliveries to a district with your own vehicle, you are considered engaged in business in the district and are required to report district use tax on the sale. If you make the deliveries through a common carrier, you generally are not liable for the tax unless you are otherwise engaged in business in the district, such as maintaining an office or other place of business in the district, or beginning April 25, 2019, your sales of tangible personal property exceed the $500,000 sales threshold.

If I buy tools, equipment, or other property for use in a district from a vendor who is not engaged in business in a district, are my purchases subject to district tax?

Yes. You are required to report and pay the district use tax.

If I live outside a district and bring brand-new and unused clothes into a district for alteration, are the alteration charges that are subject to sales tax also subject to the district tax?

Yes, the alteration charges are also subject to the district tax if they are subject to sales tax and if you pick up the altered brand-new unused clothing in the district. However, if you take delivery of the altered brand-new unused clothing outside the district for use outside the district, the transactions (sales) tax does not apply. If there is a district tax in the location where you use the property, you are required to report and pay the district use tax.

I have one retail location in California and do not have any physical presence in any other cities or counties. My sales in 2018 exceeded $500,000. Am I required to collect the district use tax when I ship property via common carrier to my customers in another district?

Yes. Because your sales in the preceding year (2018) exceeded $500,000, beginning April 25, 2019, you are considered engaged in business in any district that imposes a district tax. Therefore, you must collect the district use tax on your retail sales that you ship or deliver to your customers in a district that imposes a district tax.

Voter-approved city district taxes

I am located in San Diego County and regularly make deliveries in my own vehicle into the city of El Cajon. I am not considered engaged in business anywhere else in California. When I make taxable sales to customers in the county of San Diego, including sales into the city of El Cajon, am I liable for the higher rate for the sales to El Cajon?

The city of El Cajon, located in San Diego County, has a tax rate of 8.25 percent. This reflects the 7.25 percent statewide base rate plus 0.50 percent district tax for the entire county of San Diego and 0.50 percent in district taxes for the city of El Cajon. As of the date of this publication, the tax rate in areas of San Diego County outside the city of El Cajon, La Mesa, National City, and Vista is 7.75 percent.

If you regularly deliver merchandise within the city limits of El Cajon in your own vehicle, you are considered engaged in business in the district of El Cajon and are responsible for collecting and reporting the additional 1.00 percent El Cajon district use tax. You should not charge the El Cajon district tax on sales that occur at your business location if your business is located outside the city limits of El Cajon or for sales otherwise made outside of the El Cajon City limits.

Please note: Other cities located in San Diego County may also have district taxes. For information about tax rates in specific areas, see California City & County Sales & Use Tax Rates.

Finding the correct sales and use tax rates

For information about tax rates in specific areas, see California City & County Sales & Use Tax Rates.

To find the current sales and use tax rate for your location by address, see California City & County Sales & Use Tax Rates—Find a Sales and Use Tax Rate.

Revision June 2026

Publication 44, District Taxes (Sales and Use Taxes) Sales Across District Lines