Tax Guide for Alteration or Tailoring
Helping your business succeed is part of the mission of the California Department of Tax and Fee Administration (CDTFA). The taxes you collect and pay help fund state and local services and programs important to you and your community. We recognize that understanding tax issues related to your clothing alteration or tailoring business can be time consuming and complicated. We want to help you get the information you need so you can focus on starting and growing your business.
We created this guide to provide you with easily accessible information to assist you in understanding your sales and use tax obligations related to alteration or tailoring services.
How to Use This Guide
Each section of this guide provides information relevant to your business.
The Getting Started section provides key resources related to registration, account maintenance, filing and payments, and recordkeeping practices.
The Industry Topics section covers many topics, each in an at-a-glance format that can be expanded to provide more extensive information.
Lastly, the Resources section provides links to a wealth of information, including forms and publications, current updates, and other helpful resources.
Please note the general information provided in this Tax Guide does not supersede any law or regulation. This guide summarizes the law and applicable regulations in effect when it was published. However, changes in the law or regulations may have occurred. If there is a conflict between this guide and current law, the current law governs.
Get it in Writing
Tax and fee laws can be complex and difficult to understand. If you have specific questions regarding how tax applies to alteration or tailoring services, we recommend that you get answers in writing from us. This will enable us to give you the best advice and may protect you from owing tax, interest, or penalties should we give you erroneous advice. Such protection is not provided for advice that is furnished to you verbally, in person, or on the telephone.
Requests for written advice can be emailed to us or mailed directly to the CDTFA office nearest you.
For more details, please see publication 8, Get It in Writing.
If You Need Help
If you need assistance with the topics included in this guide, feel free to contact us by telephone or email. Contact information and hours of operation are available in the Resources section and by clicking the “Contact Us” link underneath the “Other Helpful Resources” heading.
Free Educational Consultations
Now that you have your new business up and running, you are faced with the challenge of interpreting and complying with the complex and changing Sales and Use Tax Laws.
As part of our commitment to helping you understand your sales and use tax obligations, we have established the Taxpayer Educational Consultation Program. This free program provides eligible businesses with education and assistance and helps business owners prepare for their sales and use tax reporting requirements.
If you have suggestions for improving this guide, please contact us via email.
If you own a business that performs alteration or clothing tailoring services in California and you expect to sell merchandise items (tangible personal property), or perform taxable services, you must register with the California Department of Tax and Fee Administration (CDTFA) for a seller’s permit. You must also file regular sales and use tax returns. Whether you are starting a new business or growing your alteration or clothing tailoring business, you will find the following tools helpful in maintaining your account with us.
Online Registration – Register with us for your seller's permit or add a business location to an existing account.
Filing, Payments, and Account Maintenance
- Tax Return Filing Deadlines – Find your filing due dates.
- File a Tax Return Online – CDTFA's online filing service is easy, fast, and free!
- Online Payment Options – Make payments online for tax and fee programs.
- Taxpayer Online Service Portal – Update your account information by logging in to our online services system.
If you hold a California seller’s permit or any other CDTFA license or permit, you are required to maintain business records to verify that you have properly paid the tax or fee.
Maintaining good books and records will help you keep track of your sales and purchases and will assist you when preparing your sales and use tax returns. You are required to keep records for at least four years unless we give you specific, written authorization to destroy them sooner. Not maintaining records may be considered evidence of negligence or be perceived as an intent to evade the tax process. This may result in interest and penalties.
Your records should be adequate so we may:
- Verify the accuracy of your tax returns; and
- Determine if you have correctly paid the tax due on your sales and purchases.
You should keep any records that include, but are not limited to:
- Cash register tapes and receipts
- Sales invoices
- Purchase invoices
- Shipping documents
- Resale certificates
- Tax returns and supporting documents
For more information on recordkeeping, please see publication 116, Sales and Use Tax Records.
Sales and Use Taxes in General
In California, all sales of tangible personal property, which the law defines as an item that can be seen, weighed, measured, felt, or touched, are taxable unless the law provides a specific exemption or exclusion. As a business performing alteration or clothes-tailoring services, the services you perform on tangible personal property such as clothing, bedding, draperies, or other personal and household items (items) may be taxable.
Use tax is the companion to California's sales tax, and is due whenever you purchase taxable items without payment of California sales tax from an out-of-state vendor for use in California. You also owe use tax on items that you remove from your inventory and use in California when you did not pay tax when you purchased the items. To pay use tax, report the purchase price of the taxable items under “Purchases Subject to Use Tax” on your sales and use tax return. Those purchases become part of the total amount that is subject to tax.
If you use or give away taxable items such as clothing or other miscellaneous items you purchased without paying sales tax, you owe the equivalent use tax – usually equal to the sales tax – based on the cost of those items to you.
Most people who sell taxable items or perform taxable labor (for example, fabrication) in California, even temporarily, must register with the CDTFA for a seller's permit and report and pay tax on your taxable transactions.
Registering for a seller's permit is free, although in some cases a security deposit may be required.
If you have more than one business location, you must register each individual location with us separately.
You can register for a seller's permit or consolidated seller's permit with us using our Taxpayer Online Service Portal.
Be sure to let us know about any changes to your business, such as, a change to your mailing or email address, so that we can keep your records updated and inform you of important changes in law, tax rates, or procedures. You can easily update your account information by creating an online account in our online services with a username and password, contacting our Customer Service Center, or any one of our field offices throughout the state. Contact information is available in the Resources section of this guide.
Know your Tax Rates
The current statewide base sales and use tax rate is 7.25 percent. However, the total sales and use tax rates are higher in areas where district taxes are imposed.
District taxes are voter-approved taxes imposed by cities, counties and other local jurisdictions, and are added to the statewide base rate. If you are a retailer, you are responsible for reporting your retail sales and paying the sales tax on those sales to us at the proper rate. If you make retail sales in California from a business located in a taxing district, you are generally responsible for the district sales tax. You are also responsible for collecting, reporting, and paying the district use tax when making sales for delivery into taxing districts in which you are considered “engaged in business in the district.”
Generally, you are “engaged in business in a district” when you meet one of the following conditions:
- Have a permanent or temporary business location in the district, including a warehouse, salesroom, or office,
- Have a representative or agent in the district, even temporarily, who, for example, makes sales, takes orders, or makes deliveries for you,
- Receive rental income from the lease of merchandise located in the district,
- Make annual sales of tangible personal property in California, or for delivery in California exceeding $500,000.
- On and after April 25, 2019, a retailer is considered engaged in business in all districts that impose a district tax if in the preceding or current calendar year their total combined sales of tangible personal property in this state or for delivery in this state exceed $500,000. As such, all retailers meeting this threshold are responsible for collecting and paying any district tax on taxable sales made for delivery in any district that imposes a district tax.
For more information on being engaged in business and the correct district tax rates, please see publication 44, District Taxes (Sales and Use Taxes) or our Local and District Tax Guide for Retailers.
You can look up tax rates by city and county or find the full tax rate in your city or county by going to the Find a Sales and Use Tax Rate webpage and entering the address as prompted.
Key Industry Topics
The information provided below includes common industry topics for businesses that perform alteration or clothing tailoring services. If you are a business that performs such services, your alterations or clothing tailoring may be taxable.
If your business is a dry cleaning establishment, you may have different registration requirements depending on whether certain gross receipts thresholds are met. To determine if you are required to register for a seller's permit, see the “When You are a Dry Cleaning Business” heading below for more information.
Making Alterations to New Items:
Charges for alteration or clothing tailoring services performed on new items are generally considered taxable.
The charges you make for altering new items are taxable regardless of whether the charges are separately stated or included in the selling price of the clothing.
Examples of alterations made to new items may include, but are not limited to:
- Shortening or lengthening sleeves or pants
- Modifying waist sizes
- Changing design
- Adding or Removing material
Items are considered new and tax applies when it’s altered if:
- The labels or tags are still attached,
- It has unfinished hems, cuffs, or other parts, or
- It has not been previously worn by the customer (except to try on).
Your customer brought in a suit and asks you to make alterations including shortening the length of the pants and removing material from the suit jacket to make it smaller. You notice tags are still attached to the suit and the suit has not been worn. Your alteration service charge is taxable.
Supplies and Materials used to Perform Alterations on New Items
Alteration or clothing tailoring services performed on new items are considered taxable. Tax applies to the total charge for the alterations, with no deduction for your cost of supplies and materials.
You may issue a valid resale certificate to purchase your supplies and materials used to perform alteration services on new items without payment of tax. If you commingle your supplies and materials used to make alterations to both new and used items, you may not know at the time you purchase supplies and materials if you should pay tax on your purchases to your supplier. Therefore, if you pay tax on all of your supplies and materials, and later withdraw supplies and materials from inventory to perform alteration services on a new item, you may take a “Tax-Paid Purchases Resold” deduction on your sales and use tax return based on your cost of the supplies and materials used in making alterations.
For more information about issuing a resale certificate, see publication 103, Sales for Resale.
Making Alterations to Used Items:
Alteration or clothing tailoring services performed on used items are generally not taxable.
Items are considered used and tax does not apply when it's altered if:
- It has previously been worn/used by the customer, or
- It is in a state of disrepair (that is, worn-out or torn).
The charges you make altering used items are generally not taxable when the alterations are made to repair the item to the intended use for which it was created or produced.
Examples of alterations to used items may include, but are not limited to:
- Replacing a zipper or button(s),
- Mending or patching a hole,
- Taking in or letting out,
- Making size adjustments.
- Otherwise altering used items such as clothing, bedding, draperies, or other personal and household items when such alterations merely refit or repair the item for the use for which it was created or produced.
Your customer brings in a suit and asks you to make size adjustments. The suit doesn’t have tags or labels attached and has clearly been worn. The alteration service charge is considered repair labor and is not taxable.
Supplies and Materials used to Perform Alterations on Used Items:
Generally, persons performing the alteration of used items are consumers, not retailers, of the supplies and materials furnished in connection with the alterations, and tax applies to the sale of the supplies and materials to such persons.
If the retail value of the supplies and materials you use to make alterations to a used item is more than 10 percent of the total charge for the alterations, or if you make a separate charge for the supplies and materials, you are considered the retailer of the supplies and materials and tax applies to the fair retail selling price of the supplies and materials to the customer.
If the retail value of the supplies and materials used to make the alterations are 10 percent or less of the total charge and you don't make a separate charge on the invoice, you are considered the consumer of the supplies and materials, meaning you should pay tax when purchasing the supplies and materials from your supplier.
You may not know at the time you purchase supplies and materials whether you will be considered the consumer or retailer. Therefore, you may pay tax on your purchases to your supplier when purchasing supplies and materials and later, for those transactions where you are the retailer, you may take a “Tax-Paid Purchases Resold” deduction on your sales and use tax return based on the cost of the supplies and materials.
Alternatively, you may purchase supplies and materials without paying tax, because you provided your supplier a valid resale certificate, and you later withdraw them to make alterations to a used item, where you are considered the consumer of the supplies and materials. As the consumer you must pay use tax based on your cost of the supplies and materials under "Purchases Subject to Use Tax" on your sales and use tax return.
For more information about issuing a resale certificate, see publication 103, Sales for Resale.
Making Alterations to Rented Items
Whether alteration or clothing tailoring services performed on an item you lease “rent” (for example, tuxedos) are taxable depends on if you paid tax when you acquired the item.
Generally, if you did not pay sales or use tax when you purchased the item from your supplier, the rental charges you make to your customers for the use of the item are taxable. Any alteration charges in connection with the rental of the item are taxable because the alterations are necessary for your customer to rent items in the form desired. However, if you paid sales or use tax when you purchased the item from your supplier, and the item will be rented in substantially the same form as acquired, the rental charges you impose on your customers are not taxable. The alteration charges in connection with the rental of the item are also not taxable.
You purchased a tuxedo you plan to rent and did not pay tax on your purchase. You rented the tuxedo to your customer and the customer requested alterations be made to the tuxedo prior to the rental. The charges for the tuxedo rental and alterations are taxable, regardless of whether the tuxedo is new or used.
You own a wedding dress rental business. You paid tax on your purchases of wedding dresses, which you will later rent to customers. Because you paid tax when you acquired the wedding dresses, your rental charges to your customer and alteration charges are not taxable.
For more detailed information on how tax applies to rented items, see publication 46, Leasing Tangible Personal Property.
Embroidery services may be taxable depending on whether the item is new or used.
Embroidering New Items:
Charges for embroidery services performed on new clothing items that you sell at retail are subject to tax.
Embroidering Used Items:
Unless there is something unusual about the embroidery work (such as converting the clothing into a work of art), charges for embroidery work on used clothing items are generally not taxable so long as the retail value of the thread is not more than ten percent of the total charge and the charge for the thread is not separately stated.
When You are a Dry Cleaning Business
As a dry cleaner, your charges for alteration services to repair old clothing items are generally not taxable. Depending on whether you also make alterations to new clothing and meet certain gross receipts thresholds based on your business operations, you may not be required to obtain a seller's permit.
Do I need a Seller's Permit?
If you only make alterations to old items (see “Making Alterations to Used Items” heading above), you are considered the consumer (meaning you should pay tax on your purchases to your supplier) for supplies and materials used and your charges for alteration services are not taxable. You will not be required to obtain a seller’s permit so long as you don’t make other types of taxable sales.
If you perform alteration services on new clothing (see “Making Alterations to New Items” heading above), you are regarded as a retailer of the alteration services and are required to obtain a seller's permit, unless:
- 75 percent or more of your establishment's total gross receipts represent charges for clothes cleaning or dyeing services, and
- No more than 20 percent of your establishment's total gross receipts during the preceding calendar year were from the alteration of clothing.
If both tests above are met and you do not make any other types of sales requiring you to obtain a seller's permit, your charges for alteration services performed on new items are not taxable and you will not be required to obtain a seller's permit.
You are a dry cleaner that provides clothing alterations. This year, you received $85,000 from your cleaning operations, $2,000 from your alteration services, and $300 from your sales of miscellaneous merchandise (laundry bags, lint brushes, etc.), resulting in $87,300 in total gross receipts for the year. Last year, you received $80,000 from cleaning, $1,000 from alterations, and $100 from sales of miscellaneous merchandise, resulting in $81,100 in total gross receipts for the prior year.
Since your receipts from your cleaning operations are greater than 75 percent ($85,000/$87,300 = 97%) and the amounts you received in the prior year from altering clothing were less than 20 percent of the prior year’s total gross receipts ($1,000/$81,100 = 1%), you are considered a consumer, not a retailer, of the alteration services performed on new clothing.
- If you sell miscellaneous merchandise (laundry bags, lint brushes, etc.), you must obtain a seller's permit and report the taxes due on your sales of the miscellaneous items. If you meet the thresholds provided above and are not regarded as performing taxable alteration services on new items, your charges for altering new clothing are not taxable. In this instance, you are the consumer of the supplies and materials used for your alteration services.
Alterations Services Performed on New Items by a Third Party
How tax applies to alteration services performed on new items by a third party depends on whether you are regarded as a consumer or retailer of alteration services performed.
As a dry cleaner, if you are the consumer (see heading “Do I need a Seller's Permit?” above) of alteration services performed on new clothing, and contract with a third party (for example, a tailor) for the alteration of a new item instead of performing the alteration yourself, you must pay tax on the alteration services charged by the third party.
As a dry cleaner, if you are the retailer (see heading “Do I need a Seller's Permit?” above) of alteration services performed on new clothing, and contract with a third party (for example, a tailor) for the alteration of a new item instead of performing the alteration yourself, you may issue a valid resale certificate to the third party performing the alteration services. The charge to your customer for alteration services is taxable.
Need to know more? Follow the links below for more information about the topics covered in this guide, as well as other information you might find helpful:
- Publication 44, District Taxes (Sales and Use Taxes)
- Publication 46, Leasing Tangible Personal Property
- Publication 100, Shipping and Delivery Charges
- Publication 103, Sales for Resale
- Publication 108, Labor Charges
- Publication 116, Sales and Use Tax Records
- Publication 125, Dry Cleaners
- Regulation 1506, Miscellaneous Service Enterprises
- Regulation 1546, Installing, Repairing, Reconditioning in General
- Regulation 1549, Fur Repairers, Alterers and Remodelers
- Regulation 1660, Leases of Tangible Personal Property – in General
- Regulation 1698, Records
Other Helpful Resources
- CDTFA Online Services – Learn about the online services CDTFA offers, including online registration for seller's permits and other accounts.
- CDTFA Locations – Contact us using this comprehensive listing of all CDTFA offices.
- City and County Tax Rates – You will find a listing of current city and county tax rates.
- Contact Us – This page shows the various ways you may reach us to resolve your questions and concerns.
- Find Your Tax Rate – You can look up the current sales and use tax rate for a specific address.
- Get It in Writing! – The Sales and Use Tax Law can be complex, and you are encouraged to put your tax questions in writing.
- News Releases – CDTFA News Releases cover a broad range of topics, including updates to tax laws and to resources for taxpayers.
- Special Notices – Special Notices offer taxpayers guidance regarding law and policy changes, significant news, program updates, and other important information.
- Sign Up for CDTFA Updates – Sign up to receive a monthly email detailing important business information, including Special Notices, Tax Information Bulletins, and updates for local services.
- Taxpayers' Rights Advocate (TRA) – The TRA Office helps taxpayers when they are unable to resolve a matter through normal channels (for example, by speaking to a supervisor), when they want information regarding procedures related to a particular set of circumstances, or when there are apparent rights violations.
- Verify a Permit or License – You can use this search feature to verify a seller's permit, cigarette and tobacco products retailer's license, eWaste account, or underground storage tank maintenance fee account.
- Videos and How-To Guides – These resources will help you avoid common mistakes, file your tax returns online, and more.
- Local and District Tax Guide for Retailers – A tax guide for retailers to learn more about how to properly collect, report, and pay local and district taxes.