Industry Topics for Home-Based Businesses

Internet Sales

Internet sales, including sales made through Internet auction houses, online shopping platforms, or your own website, are treated the same as sales made at retail stores or through other outlets, such as through sales representatives, over the telephone, or by mail order.

There is no general tax exemption for sales of tangible personal property (merchandise) made over the Internet. Therefore, your retail Internet sales that take place in California, or are for delivery in California, are generally subject to sales or use tax, unless a specific exemption or exclusion applies.

You are responsible for collecting and paying the tax on your Internet sales, which includes sales you make through Internet shopping platforms or Internet auction houses. The responsibility exists unless the shopping platform or Internet auction house is owned or operated by a marketplace facilitator, as defined in the Marketplace Facilitator Act, which is responsible for paying and collecting the tax on your Internet sales. For more information on who is responsible for the tax on sales facilitated through a marketplace, please see our online guide, Tax Guide for Marketplace Facilitator Act.

Beginning October 1, 2019, marketplace facilitators (as defined by Revenue and Taxation Code, section 6041(b)) that own or operate Internet auction houses and other Internet shopping platforms may be required to pay and report the tax to CDTFA and report and pay tax on sales of merchandise facilitated through their marketplace (e.g., Internet website). You should contact your Internet auction house where you sell merchandise to determine if they are a marketplace facilitator and are responsible for the tax on sales made through their auction house.

If all your sales of merchandise will be facilitated by a marketplace facilitator that is registered as a seller or retailer with CDTFA, beginning October 1, 2019, you are not required to obtain a seller's permit or a Certificate of Registration — Use Tax from CDTFA.

For more information, please see Publication 177, Internet Auction Sales and Purchases, Publication 109, Internet Sales, and our online guide, Tax Guide for Marketplace Facilitator Act.

Additional registration information is also available for online retailers on the Online Retailers: Registration and Local Tax tab of our Local and District Tax Guide for Retailers.

Section 6015 Retailers

If you do not have a storefront and only sell products you buy from what is referred to as a Revenue and Taxation Code (RTC) section 6015 retailer (section 6015 retailer), then you do not need a seller's permit.

Typically, section 6015 retailers include multi-level marketing retailers that solicit sales through a network of individual salespeople or representatives. Individuals who sell these products have “shows” or “parties” and sell merchandise at their own home, a customer's home, on the Internet, or through direct sales to friends and family.

If you are an agent of a section 6015 retailer, that company will remit sales tax to CDTFA on your behalf. The section 6015 retailer is regarded as the retailer and collects the sales tax on the suggested retail sales price when they sell the items to you.

Section 6015 retailers cannot accept resale certificates from you unless you hold a California Sales or Use Tax permit and sell the products through a storefront. A storefront does not include home-based businesses.

For more information, please see RTC section 6015.

Garage Sales

When you have a garage sale and sell used personal goods, you are generally not required to hold a seller's permit.

Each garage sale is considered a single sale, even though multiple items may be sold. When a person holds less than three (i.e. one or two) garage sales, of used goods that were accumulated for their own use, within a 12-month period, they are usually considered to be an occasional seller and not a retailer. However, if a person holds a third garage sale within a 12-month period, they are considered to be a retailer and are required to hold a seller's permit.

Service Businesses

If you are in the business of providing a service, your charge for the service is generally not taxable.

If, in addition to the services you provide, you regularly make sales of items to consumers, you will generally be considered the retailer of the items you sell and you are required to hold a seller's permit. Unless otherwise exempt, your sales of those items are subject to tax. In addition, any services that you provide that are part of the sale of the item sold will generally be taxable as well.

Below are some common service industry home-based businesses that may also make sales of goods:

Interior Designers or Decorators

An interior designer or decorator generally provides services such as design, repair, color coordination, and planning. In addition to the services mentioned, an interior designer or decorator may also sell goods, such as furniture, window coverings, carpeting, home accessories, cabinets, and samples. Therefore, if you are an interior designer or decorator and you sell any goods to your clients, your sales of goods are taxable and you are required to hold a seller's permit.

In general, your fees charged for consultation, layout, coordination of furniture and fabrics, selection of color schemes, etc., are considered charges for professional services. The charges are not subject to tax when they are not directly related to your sale of goods. However, tax does apply to your charges that are directly related to acquiring and providing furnishings and other goods you sell to a client. Your fees for nontaxable charges should be separately stated from charges related to sales of goods.

Example:
When you charge fees to accompany a client to a showroom to select furniture the client is buying from you, those fees are taxable, because it a part of your taxable sale of furniture to your clients.

For more information on the application of tax to charges from interior designers, please see publication 35, Interior Designers and Decorators.

Photographers

As a photographer who makes sales of printed photos or related goods, you are required to hold a seller's permit. You are generally making a sale of goods when you transfer photos to your customer in a tangible form. Tangible forms include prints as well as electronic files contained on tangible media (e.g.CD, flash drive or DVD). The sales of printed photos and related goods are treated the same as other goods and are generally taxable unless a specific exemption or exclusion applies.

Photography services are generally subject to tax if they are part of the sale of tangible property (e.g. photos). However, your fee charged for photography services, including taking photographs and editing, are not taxable when:

  • There is no transfer of photos or related goods in tangible form, and
  • There is no intent of later providing printed photos or goods to your customer.

However, when you perform photography services that result in a sale of photos or related goods in tangible form, your entire charge is taxable regardless of whether you separate the charges for the services or labor performed in creating the printed photos or related goods.

Example:
You enter into a contract with a client to provide them with photography services and a link to their digital images. When you electronically transfer copies of the images, tax does not apply to the charges for the service or for the digital images. The sale of the electronic data is not a taxable transaction.

However, if you provide printed photos with your photography services, tax applies to the entire charge. The printed photos are tangible personal property and the sale of the printed photos is subject to tax. When the printed photos are transferred to your client, tax would apply to the gross receipts. The gross receipts would include all charges that are related to the production and creation of the printed photos, including your photography services.

For more information on the application of tax to charges from photographers, please see publication 68, Photographers, Photo Finishers, and Film Processing Laboratories, or our Tax Guide for Photography.

Sales of Food

Generally, the sales of hot food are taxable, while the sales of cold food to-go are not taxable.

However, tax does apply to sales of hot and cold food products that are sold:

  • To be consumed on the business premises, or
  • In a form to be consumed at tables, chairs, or counters or from trays, glasses, dishes, or other tableware (provided by the retailer or by a person with whom the retailer contracts to furnish, prepare, or serve food products to others), or
  • At an event where admission is charged.

Unlike a restaurant, home-based businesses do not generally sell prepared food to be consumed at the place of business. However, if you prepare and sell food products from your home, and you meet one of the conditions mentioned above, your sales of food products are taxable.

Below are some common retailers of food (some who generally do not operate from a physical location) and the application of tax to their business.

Caterers

A caterer is in the business of serving meals, food or drinks on the premises of the customer, or on the premises supplied by the customer.

Tax generally applies to charges made by caterers for:

  • Prepared hot/cold food and drinks even though the ingredients may not be provided by the caterer;
  • Prepared hot/cold food whether or not served by the caterers; and
  • Any other services related to the preparation and serving of food for clients (e.g. cutting and serving a cake provide by the customer).

For more information on caterers, please see Tax Guide for Caterers.

Mobile Food Vendor

A mobile food vendor does not have a physical location and generally sells food or drinks from a truck, stand, or wheeled cart. If you are a mobile food vendor (e.g. a hotdog cart), you must report tax on your sales of hot, prepared food and carbonated beverages, such as sodas. In addition, your sales of cold food are taxable when:

  • Sold for consumption at tables that you provide, or
  • Sold at a place that charges admission such as swap meets, trade shows, etc.

For more information, please see publication 287, Mobile Food Vendors Tax Guide and Tax Guide for Caterers.

Home-Based Bakeries

The sales of baked goods such as bread, cookies, cakes, including wedding cakes, are generally not taxable, when sold on a “to go” basis, or sold for resale (e.g. to a caterer). However, if the cakes are sold for consumption at the home-based business location, the sales are subject to tax.

For example, if you charge your customer a cake tasting fee, tax would apply to your charges as the cake is considered to be consumed at your home-based business location.

Selling at Swap Meets, Flea Markets and Special Events

In general, sellers at swap meets, flea markets and special events that make retail sales are required to obtain a seller's permit.

As a seller at swap meets, flea markets and special events, you are required to provide specific information to the operator of the event in order to sell there. You can use form CDTFA-410-D, Swap Meets, Flea Markets, or Special Events Certification, to provide the required information. Your sales are generally subject to sales tax unless they qualify for a specific exemption or exclusion.

Temporary Sellers

If you will be selling items at a location for less than 90 days, you are considered a temporary seller, and are required to hold a temporary seller's permit. You will need to register each temporary sales location. However, if you participate in three or more swap meets, flea markets, and special events in a 12-month period, you must obtain an ongoing seller's permit. If you already hold a seller's permit for a permanent place of business (your home-based business location) but also make sales at a temporary location, you will not need to register for a separate temporary seller's permit. Instead, you must register for a sub-permit for each of your temporary locations. You can register a temporary location online, under Register a Business activity with CDTFA, click Add a new location to an existing account link and follow the prompts.

Example 1:
You sell your handmade soaps at two craft fairs annually. You make no other sales at any other time in a 12-month period. You will be required to obtain a temporary seller's permit for each fair and register each location.

Example 2:
You sell your handmade soaps at two craft fairs annually. In addition, you also sell your handmade soaps online. Since you make more than two sales in a 12-month period and are engaged in the business of making handmade soaps, you will need to obtain an ongoing seller's permit.

Sales Made on State-Designated Fairgrounds

Effective July 1, 2018, if you are a retailer who makes sales of tangible personal property that take place on the real property of a California state-designated fair (“state-designated fairground”), you must separately state the amount of those sales on your Sales and Use Tax return. Sales that take place on state-designated fairgrounds include over-the-counter sales on the fairgrounds and also may include sales in which the property is shipped or delivered to or from the fairground.

The separately reported amount will be used for funding allocation purposes only. There is no additional tax or fee due on these sales. For more information on the new reporting requirement, please see Tax Guide for Reporting Requirements on State-Designated Fairgrounds.

Itinerant Veteran Vendors

(As of December 31, 2021, this program is no longer in effect.)

The itinerant veteran vendor program was authorized by legislation and was in effect from April 1, 2010, through December 31, 2021. Qualified itinerant veteran vendors were generally the consumers of items they owned and sold, and were not required to hold a seller's permit. As an itinerant veteran vendor, you were required to pay tax on your purchases of all taxable items that you intended to sell.

Under Revenue & Taxation Code section 6018.3, you were considered a qualified itinerant veteran vendor if all of the following applied:

  • You were honorably discharged from the United States Armed Forces,
  • You were a sole proprietor with no employees,
  • You had no permanent place of business in this state, and
  • You were unable to obtain a livelihood by manual labor due to a service-related disability.

However, if you sold alcoholic beverages or taxable items for more than $100, you were considered a retailer of those items and were required to obtain a seller's permit and report tax on those sales.

Examples of qualified itinerant veteran vendor businesses included:

  • Swap meets or flea market vendors,
  • Lunch wagon operators, or
  • Coffee cart operators.

Starting January 1, 2022, itinerant veteran vendors who previously qualified for the above exemption are required to obtain a seller's permit, file sales and use tax returns, and remit tax on their retail sales in California.

If you are not sure whether you need a seller's permit or whether your sales are taxable, you may contact our Customer Service Center for help at 1-800-400-7115 (CRS:711). Customer service representatives are available Monday through Friday from 7:30 a.m. to 5:00 p.m. (Pacific time), except on state holidays

Local Taxes

“Local Taxes” are sales and use taxes imposed by local jurisdictions, usually cities or counties, under the Bradley-Burns Uniform Local Sales and Use Tax Law. The current statewide sales and use tax rate is 7.25 percent, which includes 1.25 percent of local taxes (1.00 percent Local Jurisdiction and .25 percent Local Transportation Fund). When you file your sales and use tax return you are generally required to allocate your sales among local jurisdictions, either directly or through a countywide pool. The 1.00 percent portion goes to the city or county where the sale or use occurs. The .25 percent portion always goes to the county where the sale or use occurs. By properly allocating your sales you ensure that the local jurisdiction receives proper funding of local tax. These funds are used by local jurisdictions for their city or county operations, including for transportation.

For more information about allocating local tax, please visit our Local and District Tax Guide for Retailers.

Note: If you are an online retailer, you are required to collect, report, and pay tax like other retailers, but how you allocate your internet transactions can depend on several factors. For more specific information on local tax reporting requirements for online retailers, see the Online Retailers: Registration and Local Tax tab of our Local and District Tax Guide for Retailers.

District Tax Collection Requirements

The total sales and use tax rate is not the same throughout California. Total sales and use tax rates may be higher than the 7.25 percent statewide rate in areas where there are voter-approved district taxes. Retailers with a place of business in a district are generally required to pay the district’s transactions (sales) tax on sales made at that location or for delivery from that location within the district. Retailers are also required to collect and remit to CDTFA the district use tax on their sales for delivery into any district in which the retailer is engaged in business.

For more information, please see Publication 44, District Taxes (Sales and Use Taxes) and our online guide, Local and District Tax Guide for Retailers.