Other General Information for Local Jurisdictions and Districts
In this section, we provide general information on commonly used terminology, how to understand tax area codes, annexation procedures, retailers with locations straddling boundary lines, and more. You can expand the section headings to see more on each topic.
Tax Area Codes
Accurate tax area coding is critical to the local and district tax allocation process. The coding is the basis for properly distributing local and district tax revenue.
Each city, city and county, county, or other authorized government entity is identified by a 12-character alpha numeric tax area code assigned to the business address. Our tax area code specialists verify business addresses with maps provided by local jurisdictions and districts, and other jurisdictional boundary resources, to ensure that proper tax area codes are assigned, when questionable.
Sharing Local Tax from Taxpayers
Local jurisdictions such as cities and counties may wish to split the revenues generated at one business location.
True "revenue sharing" means the sharing of local tax revenues after they are distributed. Article XIII, Section 29, of the California Constitution authorizes cities and counties to enter into revenue sharing agreements as follows:
- The Legislature may authorize counties, cities and counties, and cities to enter into contracts to apportion between them the revenue derived from any sales or use tax imposed by them which is collected for them by the State. Before any such contract becomes operative, it shall be authorized by a majority of those voting on the question in each jurisdiction at a general or direct primary election.
- Notwithstanding subdivision (a), on and after the operative date of this subdivision, counties, cities and counties, and cities may enter into contracts to apportion between them the revenue derived from any sales or use tax imposed by them pursuant to the Bradley-Burns Uniform Local Sales and Use Tax Law, or any successor provision, that is collected for them by the State, if the ordinance or resolution proposing each contract is approved by a two-thirds vote of the governing body of each jurisdiction that is a party to the contract.
For example, suppose a business located in one jurisdiction draws its customer base from a neighboring jurisdiction. A revenue sharing agreement may be desirable so that both local jurisdictions may share the tax in an equitable manner.
By contrast, suppose a retail establishment straddles a border between jurisdictions, with sales being made in more than one jurisdiction. In this case, the neighboring jurisdictions may agree to divide the revenues for this location based on the percentage of sales occurring at each place. CDTFA will open a site location and issue a separate sub-permits for the same location, and the local tax is allocated according to the agreement between the jurisdictions.
Notification Thresholds Listing
The Notification Thresholds Listing provides notification thresholds that are used by our Local Revenue Branch (LRB) to notify a substantially affected local jurisdiction or district when there is a potential redistribution of local or district tax.
A local jurisdiction or district may appeal the proposed redistribution once they receive a notification letter from us. See the Local and District Tax Petitions section of this guide for more information. You may find the notification threshold for your local jurisdiction or district on our Notification Threshold Listing webpage.
When the Full One Percent (1%) of Local Tax isn’t Imposed
Cities may impose a rate of up to one percent (1%); however, some cities and counties may come to an agreement to impose a lower local tax rate so that the county receives more. Generally, the city and county must each provide an ordinance when a rate of less than 1% is imposed by a city*. For more information, contact LRB by email at jservices@CDTFA.ca.gov or by telephone at 1-916-309-5800.
*See Revenue and Taxation Code section 7202.
Changes to Formatting of District Tax Codes (Schedule A)
Effective October 1, 2022, we modified the codes used to identify special taxing jurisdictions (district tax codes) from a three-digit numeric format to a three-character alpha numeric format.
This change began on October 1, 2022. District tax codes issued prior to this date will remain unchanged.
Annexation Procedures
Our LRB is responsible for assisting local jurisdictions and districts in the administration of local and district sales and use tax for annexed areas. The information listed below is used to identify sales and use tax accounts located within an annexation area and to initiate changes to our registration records to include those accounts within the annexing local jurisdiction or district.
Boundary Changes
In each county, the local agency formation commission (LAFCO) has the responsibility to file a statement whenever there is a change in boundaries of a local jurisdiction or district.
The LAFCO will file the statement with the Board of Equalization (BOE) using form BOE-400-TA, Statement of Boundary Change, and should include:
- Change of Jurisdictional Boundary, (8-05) Requirements
- Sample Map and Geographic Description
- Counties required to file a TRA Assignment Letter
The last day for local jurisdictions or districts to file specified statements informing BOE’s Tax Area Services section and the various assessors‘ officers of boundary changes is December 1 of each year. The BOE’s Tax Area Services section forwards copies of these annexation documents to our CDTFA’s LRB team.
Local jurisdictions and districts are required by statute to reimburse BOE for the cost of maintaining current boundaries on the tax-rate area maps. For complete instructions and fee schedules related to boundary changes, see Statement of Boundary Change on the BOE’s website. Questions concerning these requirements should be directed to BOE’s Tax Area Services section by email at TASS@boe.ca.gov or by telephone at 1-916-274-3250.
Organization or Reorganization of City Boundaries
For organization changes or reorganization, which include the incorporation of, annexation to, or detachment from a city, the statement should also include the estimated population of the affected territory, a map showing limited addresses on streets within the affected territory, and a complete alphabetical list of all streets within the affected area with beginning and ending street numbers. This information is essential to identify businesses that must be changed in our records. Since businesses may be operated from homes in residential areas, it is important that all residential streets be included on the list as well as commercial streets.
Annexation of Undeveloped Areas
If the annexed area is undeveloped, the information about street names and numbers should be furnished to our LRB team as soon as it becomes available.
Information should be provided about any new streets or extensions opened in other parts of the city, any changes in city street names, any renumbering of streets that bring numbers within the city that were formerly outside or vice versa, and any changes in postal addresses from route and box numbers to city street numbers. Receipt of this information will help ensure that your city receives credit for local sales and use taxes collected from all sellers whose places of business are within the city limits.
Annexations and Incorporation of New Cities
The effective dates of annexations are determined by the date the BOE’s Tax Area Service section receives proper notice of annexation. "Proper notice" means a legal filing according to section 54900 et seq. of the Government Code with the State-Assessed Properties Division of the BOE, together with a map of the area affected showing pertinent bordering addresses.
The effective date of annexation will be the first day of the quarter after BOE has been properly notified for no less than two months. Annexations are made effective according to the following schedule.
Date of Proper Notice: | Effective Date of Annexation: |
---|---|
8/2/YY – 11/1/YY | 1/1/YY |
11/2/YY - 2/1/YY | 4/1/YY |
2/2/YY - 5/1/YY | 7/1/YY |
5/2/YY - 8/1/YY | 10/1/YY |
Please Note: For receipt dates in August–November, the effective date of the annexation is the following year (example, 8/2/22–11/2/22–Effective Date 1/1/23).
For information for requirements for statements, geographic descriptions, maps, and fees is found in sections 54900 through 54903 of the Government Code.
Common Terms
Below is a chart containing commonly used terms and definitions related to local and district taxes.
Term | Definition |
---|---|
Advance | Estimated payment distributed to a local jurisdiction or district at least twice per calendar quarter, as required by statute. |
Allocation | The identification of money as belonging to a specific local jurisdiction or district. |
Date of Knowledge (DOK) | Date factual information sufficient to support the probability that an erroneous allocation has occurred and the suspected erroneous allocation is documented. Also, the date the Allocation Group receives a valid petition (see Regulation 35056). |
Distribution | The disbursement of money to local jurisdictions or districts based on allocations received by retailers. |
Improper Allocation | Term used to describe suspected incorrect allocation of funds prior to verification by CDTFA staff. |
Misallocation | Incorrect allocation of funds. |
Petition | A request or inquiry that CDTFA receives from a local jurisdiction or a district for investigation of suspected misallocation of local tax or district tax. A petition must be submitted in writing and include sufficient factual data to support the misallocation. A petition also means a jurisdiction’s written objection to a notification from LRB that local or district tax previously distributed to it was incorrectly allocated and distributed and will be redistributed (see Regulation 35056). |
Quarterly Cleanup | Net amount of tax receipts due to be paid to local jurisdictions and districts after advance payments and deductions for administrative costs. |
Seller’s Permit | The document issued by CDTFA bearing the name of the business, the business address, and the assigned seller’s permit number. The seller’s permit must be clearly displayed at the location for which it is issued (see Regulation 1699). |
Seller’s Permit Number | Also known as account number. Each retailer’s permit number is a unique identifier used to report sales and use tax. Each number is made up of a combination of: (1) office Code, and (2) nine-digit numeric portion. |
Tax Area Code (TAC) | A 12-charactor code assigned to each registered in-state business location that corresponds to the local jurisdiction (county, city, special tax district, and redevelopment agency) where the business is located, but does not always follow ZIP code areas assigned by U.S. Postal Service. In the case of out-of-state sellers reporting use tax, the assigned TAC may represent the statewide or countywide pools. |