Tax Matrix and Common Transactions for the Use Tax Collection Requirements Based on Sales into California Due to the Wayfair Decision

California Tax Matrix for Remote Sellers

To assist remote sellers in determining the tax application to many items and transactions, please see our California Tax Matrix for Remote Sellers.

For the latest information, please see the Overview tab, under the New Information section.

Overview of California Sales and Use Tax Laws and Definitions

California sales tax is imposed on retailers and applies to retailers' retail sales of tangible personal property in this state. When sales tax does not apply, California use tax is imposed on consumers and applies to consumers' purchases of tangible personal property from retailers for storage, use, or other consumption in this state. Tangible personal property is an item that can be seen, weighed, measured, felt or touched. Tangible personal property does not include such items as real property (for example, land and attached buildings), securities, travel accommodations, etc.

"Sale" and "Purchase" defined

A sale is defined as any transfer of title or possession, exchange or barter, conditional or otherwise, in any manner or by any means whatsoever, of tangible personal property for a consideration (see Revenue and Taxation Code (RTC) section 6006). A purchase is similarly defined in RTC section 6010. Sale and purchase also include any lease of tangible personal property in any manner or by any means whatsoever, for a consideration, except as specified in RTC sections 6006 and 6010 (discussed below).

"Retail Sale" defined

A retail sale means a sale for a purpose other than resale in the regular course of business in the form of tangible personal property (see RTC section 6007). For purposes of the sales and use tax law, it is presumed that all gross receipts are subject to tax until the contrary is proven. The presumption may be rebutted by the seller as to any sale by establishing to the satisfaction of CDTFA that the gross receipts from the sale are not subject to the tax or by timely taking a resale certificate as provided in Regulation 1668, Sales For Resale, or by taking an exemption certificate as provided in Regulation 1667, Exemption Certificates.

"Storage" and "Use" defined

Storage includes any keeping or retention of tangible personal property in this state for any purpose except for sale in the regular course of business or subsequent use solely outside of this state (RTC section 6008). Use includes the exercise of any right or power over tangible personal property incident to the ownership of that property, and the possession of or the exercise of any right or power over tangible personal property by a lessee under a lease, except that it does not include the sale of property in the regular course of business (RTC section 6009). When sales tax does not apply, California use tax generally applies to retailers' sales of tangible personal property to California consumers.

Measure of Tax

Sales tax is measured by the gross receipts from retail sales of tangible personal property; use tax is measured by the sales price of tangible personal property. In general, "gross receipts" and "sales price" mean the total amount of the sale or lease or rental price, as the case may be, valued in money, whether received in money or otherwise, without a deduction for:

The cost of the property sold,
The cost of materials used, labor or service cost, interest charged, losses, or any other expenses, or
The cost of transportation of the property, unless otherwise exempt.

"Gross receipts" and "sales price" include any services that are part of the sale, credit amounts given to the purchaser by the seller, and tax imposed by the United States on producers and importers of gasoline and any tax imposed pursuant to part 2 (commencing with section 7301) of division 2 of the RTC (Motor Vehicle Fuel Tax Law). Gross receipts and sales price are further defined in RTC section 6011 and RTC section 6012.

Collection of Tax and Tax Reimbursement

Retailers may collect sales tax reimbursement from their customers as provided in Regulation 1700, Reimbursement for Sales Tax. Retailers that are engaged in businesses in this state are required to collect California state and local use tax from their customers and report and pay it to the state (RTC section 6203, RTC section 6204, and RTC section 7203).

Tax Rates

The current statewide California sales and use tax rate is 7.25 percent, which includes state and local taxes. However, total sales and use tax rates are higher in areas where district taxes are imposed. In these areas, the total tax rate includes the statewide tax rate plus the district tax rate(s). To find the current tax rates from the CDTFA homepage, select Tax & Fee Rates at the top ribbon.

You can also look up the tax rate by address using the Find a Sales and Use Tax Rate by Address tool on our website. Our rate look-up tool allows you to find the tax rate by entering an individual address. Our rate look-up service may also be integrated into your sales software to compute the tax rate for each of your sales. To determine if our service will operate with your application, please select the Looking for the Tax Rate API link at the bottom of the rate look-up tool page.

General Application of Tax to Tangible Personal Property – Common Transactions

In addition to the Tax Matrix of specific items and transaction, the topics below may help you determine if your sales into California are subject to tax and the correct measure (computation) of tax. In general, retail sales of tangible personal property are subject to sales or use tax, unless exempt or excluded from tax by statute.

Tangible personal property includes items that can be touched or felt, but excludes real property (that is, principally land and buildings). Tangible personal property includes household items, appliances, electronics, clothes, shoes, books, computers, cell phones, personal care items, toys and games, arts and crafts, office supplies, tools, etc.

Cash or purchase discounts

When a retailer offers a discount for prompt payment by the customer, the retailer is offering a cash discount. Cash discounts allowed and taken on sales are not included in "sales price" or "gross receipts" and therefore, are not included in the measure (computation) of tax.

Purchase discounts are generally given to the retailer by a manufacturer or wholesaler based on the amount of purchases the retailer made from the manufacturer or wholesaler. Purchase discounts a manufacturer or wholesaler gives to a retailer are not subject to tax since they are trade discounts tied to the retailer's purchases of products, and not rebates tied to retail sales made by the retailer (discussed in separate topic, Manufacturer discounts and coupons).

For these types of cash and purchase discounts, retailers should compute the tax on the sales price after applying the discounts.

References: RTC section 6011, RTC section 6012, and publication 113, Coupons, Discounts and Rebates

Computer software; canned or non-custom programs (software) – sales or leases transferred electronically

Tax does not apply to charges for canned or non-custom programs (software) transferred to the purchaser electronically if the purchaser does not receive any type of tangible personal property, such as storage media in the transaction; for example, disk, cards, tapes, etc.

Reference: Regulation 1502, Computers, Programs, and Data Processing

Computer software; custom programs (software) and programming – sales and leases of

Tax does not apply to the sale or lease of custom programs (software), other than basic operational programs, regardless of the form in which the programs are transferred.

Tax does not apply to custom programming services performed in connection with the sale or lease of computer equipment. However, charges for custom modifications to canned or non-custom programs are nontaxable only if the charges for the modifications are separately stated or the modifications are so significant that the new program qualifies as a custom program.

References: RTC section 6010.9 and Regulation 1502, Computers, Programs, and Data Processing

Computer software; canned or non-custom programs (software) – sales or leases on tangible storage media

In general, tax applies to the entire amount charged for the sale or lease of tangible storage media on which canned or non-custom programs (software) are recorded, including charges for licenses fees and end user fees.

However, tax does not apply to license fees or royalty payments that are made for the right to reproduce or copy a copyrighted program in order for the program to be published and distributed for a consideration to third parties, even if a tangible copy of the program is transferred concurrently with the granting of such right. Any storage media used to transmit the program is merely incidental.

Reference: Regulation 1502, Computers, Programs, and Data Processing

Containers

In general, tax applies to sales of containers, except sales for resale in the regular course of business.

Tax does not apply to the sale or use of the following types of containers:

Nonreturnable containers when sold or leased without the contents to persons who place the contents in the container and sell the contents together with the container.
Nonreturnable containers when sold without the contents to persons who place food products for human consumption in the containers for subsequent sale.
Returnable containers when sold with the contents in connection with a retail sale of the contents, or when resold for refilling.
All containers when sold or leased with the contents, if the sales price of the contents is not subject to tax.
All containers when sold or leased without the contents to persons who place food products for human consumption in the containers for shipment, provided the food products will be sold.
Any container used to collect or store human whole blood, plasma, blood products, or blood derivatives held for medical purposes, including but not limited to, blood collection units and blood pack units (discussed in separate topic, Blood storage units).

References: RTC section 6364, RTC section 6364.5, and Regulation 1589, Containers and Labels

Credit given to purchaser by seller

Any amount for which credit is given to the purchaser by the seller is includable in the total sales price or gross receipts subject to tax.

References: RTC section 6011 and RTC section 6012

Fabrication labor

Fabrication is considered to be work done in creating, producing, processing or assembling a product.

In general, charges for producing, fabricating, processing, assembling, printing, or imprinting tangible personal property for a consideration for consumers who furnish either directly or indirectly the materials used in the producing, fabricating, processing printing, or imprinting are subject to tax.

References: RTC section 6006, RTC section 6010, and Regulation 1526, Producing, Fabricating and Processing Property Furnished by Consumers—General Rules

Gift or combination packages

Gift packages or gift baskets may include food, nonfood items, or a combination of both. Generally, sales of gift packages that contain only food items, such as cheese, crackers, or fruit, are not subject to tax.

However, if nonfood products, such as wine, glassware, or decorative items, are included with food products in a "combination package," the application of tax depends upon the essential character of the complete package.

If you purchase the individual items that you use to assemble a combination package that you will sell, you are required to separate the retail value of the nonfood products in the combination package when:

You have records that verify the cost of the individual items in the package, and
The retail price of the nonfood products is more than 10 percent of the retail value of the entire package, not including the container.

Tax is due on the retail selling price of the nonfood items sold in the combination package, not including the value of the container (for example, a basket, gift box, etc.).

However, if you do not have records to verify the cost of the individual items in the combination package (for example, you purchase the combination package preassembled from your supplier), then tax is due on the retail selling price of the entire combination package, including the value of the container if:

The retail value of the nonfood product exceeds 10 percent of the retail price of the entire package (excluding the container), and
You do not have records to establish the cost of the individual items in the combination package.

And lastly, if you do not have records to verify the cost of the individual items, tax does not apply to the selling price of the combination package if

The retail value of the nonfood products is 10 percent or less of the total retail value of the contents (not including the container), and
The container's retail value is 50 percent or less of the retail value of the entire package.

Please see publication 106, Combination Packaging and Gift-Wrapping, under the Combination Packages section for illustrative examples of each of the scenarios described above.

References: Regulation 1602, Food Products and publication 106, Combination Packaging and Gift-Wrapping

Labor charges for installation

In general, charges for labor or services used in installing or applying the property sold are not subject to tax.

References: RTC section 6011, RTC section 6012, and Regulation 1546, Installing, Repairing, Reconditioning in General.

Lease of tangible personal property – in general

In general, tax applies to any lease of tangible personal property for a consideration that is a "sale" as defined in RTC section 6006 and a "purchase" as defined in RTC 6010.

A lease of tangible personal property is considered a "sale" and "purchase" except a lease of:

Motion pictures, including television, films, and video tapes.
Linen supplies and similar articles (i.e., towels, uniforms, caps and gowns) when an essential part of the lease includes the furnishing of the recurring service of laundering or cleaning the leased articles.
Household furnishings leased with the living quarters (real property) in which they are to be used; the lessor of furnishings and living quarters must be the same.
Mobile transportation equipment for use in transportation of persons or property (see Regulation 1661, Leases of Mobile Transportation Equipment).
Tangible personal property leased in substantially the same form as acquired by the lessor or leased in substantially the same form as acquired by a transferor which the lessor or his/her transferor acquired in a transaction that was a retail sale and upon which the lessor or transferor paid sales tax reimbursement or timely paid use tax measured by the purchase price of the property.

In the case of a lease that is a "sale" or "purchase" the measure of tax is the rentals payable. Generally, the applicable tax is a use tax upon the use of the leased property in California by the lessee and the lessor is responsible for collecting the use tax from the lessee.

References: RTC section 6006, RTC section 6006.3, RTC section 6010, RTC section 6023, Regulation 1660, Leases of Tangible Personal Property—in General, and Regulation 1661, Leases of Mobile Transportation Equipment

Maintenance contracts or warranties – mandatory

A warranty or maintenance contract is mandatory when the purchaser is required to purchase the warranty or maintenance contract as a condition of the sale of a product and the purchaser does not have the option to purchase the product without the warranty or contract.

Charges for a mandatory warranty or maintenance contract are included in the amount subject to tax when a mandatory warranty or maintenance contract is sold with a product that is subject to tax.

The parts used by the retailer in the performance of a mandatory warranty or maintenance contract may be purchased for resale.

References: Regulation 1502, Computers, Programs, and Data Processing, Regulation 1546, Installing, Repairing, Reconditioning in General, and publication 119, Warranties and Maintenance Agreements

Maintenance contracts or warranties – optional

A warranty or maintenance contract is optional when the purchaser is not required to purchase the warranty or maintenance contract from the seller in order to purchase the product covered by the warranty or maintenance contract.

In general, a separately stated charge for an optional warranty or maintenance contract is not subject to tax. The parts used by the retailer in the performance of the optional maintenance agreement are subject to use tax.

Exception: A single lump-sum charge for an optional maintenance contract sold with the sale or lease of canned or non-custom programs recorded on tangible storage media is 50 percent taxable.

However, if no tangible personal property is transferred to the customer during the maintenance contract period, such as a disk containing an update, the charge for the maintenance contract is not subject to tax.

Manufacturer discounts and coupons

Manufacturer discounts or coupons allow the customer to receive an amount or percentage off the selling price of the manufacturer's product. Amounts paid by a manufacturer to a retailer to reimburse the retailer for the value of a manufacturer discount or coupon are part of the measure of tax.

However, if as a retailer you offer your customer a discount (such as a paper or paperless coupon) on the regular selling price of a product and you do not receive any compensation from a third-party for the discount, the discount is not part of your selling price or the measure of tax and tax does not apply to the discount.

References: RTC section 6011, RTC section 6012, Regulation 1671.1, Discounts, Coupons, Rebates, and Other Incentives and publication 113, Coupons, Discounts and Rebates

Newspapers and periodicals (magazines)

The sale of tangible (printed) newspapers, magazines and other periodicals is subject to tax, unless otherwise exempt.

Newspaper defined: For purposes of sales and use tax, the term "newspaper" is limited to those publications which are commonly understood to be newspapers and which are printed and distributed periodically at daily, weekly, or other short intervals for the dissemination of news of a general character and of a general interest. Newspaper does not include handbills, circulars, flyers, etc., unless distributed as part of a newspaper. Newspaper also does not include any publication which is issued to supply information on certain subjects of interest to particular groups, unless the publication otherwise qualifies as a newspaper. Advertising is not considered to be news of a general character and of a general interest.

Periodical defined: For purposes of sales and use tax, the term "periodical" is limited to those publications which appear at stated intervals, each issue of which contains news or information of general interest to the public, or to some particular organization or group of persons. Each issue must bear a relationship to prior or subsequent issues in respect to continuity of literary character or similarity of subject matter, and there must be some connection between the different issues of the series in the nature of the articles appearing in them. Each issue must be sufficiently similar in style and format to make it evident that it is one of a series. The term periodical does not include books complete in themselves, even those that are issued at stated intervals, for example books sold by the Book-of-the-Month Club or similar organizations; or "one-shot" magazines that have no literary or subject matter connection or continuity between prior or subsequent issues. Periodical does not include catalogs, programs, score-cards, handbills, price lists, order forms, maps, or shopping guides or other publications of which the advertising portion, including product publicity, exceeds 90 percent of the printed area of the entire issue in more than one-half of the issues during a 12-month period.

Exempt subscriptions: Tax does not apply to the sale or use of a printed periodical, including a newspaper, which appears at least four, but not more than 60 times each year, which is sold by subscription and which is delivered by mail or common carrier.

Print-only newspaper subscription (appears 60 or more times a year): Tax applies to charges for the sale of print-only newspaper subscriptions without access to digital content.

Digital-only newspaper subscriptions: Tax does not apply to charges that are solely for the right to access digital content, including digital-only newspaper subscriptions.

Mixed print and digital newspaper subscriptions (appear 60 or more times a year): Forty-seven (47) percent of the charge for a mixed print and digital subscription is presumed to be the taxable charge for the printed newspapers. This presumption is rebuttable.

Distributions without charge: Tax does not apply to the distribution without charge of newspapers and periodicals regularly issued at average intervals not exceeding three months and tax does not apply to the sale or use of tangible personal property which becomes an ingredient or component part of such a newspaper or periodical that is distributed without charge.

Nonprofit organizations: Tax does not apply to the sale or use of any newspaper or periodical distributed by an organization that qualifies for tax exempt status under section 501(c)(3) of the Internal Revenue Code or governmental entity established and administered for the purposes provided in section 501(c)(3), which is regularly issued at average intervals not exceeding three months and tangible personal property which becomes an ingredient or component part thereof, when:

The issues are distributed to the organization's members in consideration of the organization's membership fee; or
The issues are of a newspaper or periodical which neither receives revenue from, nor accepts, any commercial advertising.

Other Nonprofit Organizations (non IRC section 501(c)(3)): Tax does not apply to the sale or use of any newspaper or periodical regularly issued at average intervals not exceeding three months and distributed by a nonprofit organization, or tangible personal property which becomes an ingredient or component part thereof, when the issues are distributed pursuant to both of the following requirements:

The issues are distributed to the organization's members in consideration, in whole, or in part, of the organization's membership fee, and
The amount paid or incurred by the nonprofit organization for the cost of printing the newspaper or periodical is less than 10 percent of the membership fee attributable to the period for which the newspaper or periodical is distributed, whether the publication is printed within or without this state.

References: RTC section 6362.7, RTC section 6362.8, and Regulation 1590, Newspapers and Periodicals

Rebates and other incentives

Rebates and incentives, such as "Buy-Down Rebates," "Voluntary Price Reductions," "Promotions," "Instant Rebates," etc., that are issued to the retailer by the manufacturer or other third party are includable as part of the retailer's measure (computation) of tax when certain conditions are met.

Rebates and incentives are part of the retailer's taxable measure when the following three conditions are met:

The third party requires the retailer to reduce the sales price of a particular product in order to receive the payment from the third party.
The conditions to receive the payment from the third party must be certain and not dependent on other factors outside of the retailer's control, such as a condition for the retailer to place product signs in its store. However, a condition for the retailer to meet certain sales quotas for the discounted product would be outside of the retailer's control.
The payment must be for a like amount on a transaction-by-transaction basis (payment must be tied to the specific sale of the particular product in the agreement). The third party reimburses you for the specified price reduction in the agreement.

Rebates that are issued by the manufacturer or other third party directly to the customer following the purchase of certain products from a retailer are not part of the retailer's measure of tax.

References: RTC section 6011, RTC section 6012, Regulation 1671.1, Discounts, Coupons, Rebates, and Other Incentives, and publication 113, Coupons, Discounts and Rebates

Repair labor

In general, separately stated charges for repair labor are not subject to tax. Repair labor is work performed on a product to repair or restore it to its intended use.

Reference: Regulation 1546, Installing, Repairing, Reconditioning in General

Repair parts

If the retail value of the parts and materials furnished in connection with repair work is 10 percent or less of the total charge (as defined in Regulation 1546, Installing, Repairing, Reconditioning in General) and if no separate charge is made for such property, the repairperson is the consumer of the property, and tax applies to the sale of the property to them.

However, if the retail value of the parts and materials furnished in connection with repair work is more than 10 percent of the total charge, or if the repairman makes a separate charge for such property, the repairman is the retailer and tax applies to the fair retail selling price of the property.

Reference: Regulation 1546, Installing, Repairing, Reconditioning in General

Resale

A retail sale does not include a sale for resale in the regular course of business. Tax does not apply to a sale for resale.

Storage and use do not include a purchase for resale in the regular course of business. Sellers making sales for resale are relieved of the liability for sales tax and the duty to collect use tax on their sales if they take, in good faith, a timely resale certificate from a purchaser who is engaged in the business of selling tangible personal property and who holds a seller's permit. The resale certificate must be in the proper form and contain all of the essential elements pursuant to subdivision (b)(1) of Regulation 1668, Sales For Resale. See also publication 103, Sales for Resale.

References: RTC section 6008, RTC section 6009, RTC section 6091, and Regulation 1668, Sales For Resale

Returned merchandise

Amounts refunded to a purchaser returning merchandise are not part of the measure of tax when certain conditions are met.

Amounts refunded to a purchaser are not part of the measure of tax if:

The retailer refunds the full sale price of the property, including any amount designated as tax, either in cash or credit to the customer, and
The customer is not required to purchase other property at a greater price than the amount charged for the returned property.

A retailer may withhold from the refund amount an amount for rehandling and restocking costs; however, the amount withheld must not exceed the actual cost of rehandling and restocking the returned merchandise.

A retailer may claim a deduction on their sales and use tax return for returned merchandise that was previously reported as taxable if the requirements above are satisfied.

References: RTC section 6011, RTC section 6012, and Regulation 1655, Returns, Defects and Replacements

Services in which any tangible personal property transferred is incidental

Charges for services are not subject to sales and use tax if the services are not part of the sale of tangible personal property. Also, service providers are generally consumers, not retailers, of the tangible personal property they use incidentally in rendering services. Therefore, if the true object of a contact is the performance of a service, the transfer of any tangible personal property incidental to the performance of the service is not subject to tax.

References: RTC section 6011, RTC section 6012, and Regulation 1501, Service Enterprises Generally

Services that are part of the sale of tangible personal property

Sales and use tax applies to the total amount charged for tangible personal property without any deduction for the cost of the services that are provided as part of the sale.

References: RTC section 6011, RTC section 6012, and Regulation 1501, Service Enterprises Generally

Transportation charges by retailer's facilities

In general, tax applies to charges for the transportation of property to the purchaser when transportation is by facilities of the retailer.

However, tax does not apply to transportation charges to the purchaser when 1) the transportation charges are separately stated, 2) the transportation is from the retailer's place of business or other shipment point directly to the purchaser, and 3) the transportation occurs after the sale of the property is made to the purchaser (that is, the sale occurs before the transportation to the purchaser commences). Also, the amount that may be excluded from tax cannot exceed a reasonable charge for transportation by facilities of the retailer.

When the sale occurs

In general, unless explicitly agreed that title is to pass at a prior time, the sale occurs at the time and place at which the retailer completes his/her performance with reference to the physical delivery of the product, even though a document of title is to be delivered at a different time or place.

When delivery of the property is by facilities of the retailer, title passes when the property is delivered to the purchaser at the destination (that is, the sale occurs after the transportation), unless there is an explicit written agreement executed prior to the delivery that title is to pass at some other time.

References: RTC section 6011, RTC section 6012, and Regulation 1628, Transportation Charges

Transportation charges by common carrier and separately stated

Separately stated charges for the transportation of property from the retailer directly to the purchaser are not subject to tax when the transportation is by common carrier. The actual cost of the transportation to the retailer is not subject to tax. Any amount charged in excess of the cost of transportation is subject to tax.

References: RTC section 6011, RTC section 6012, and Regulation 1628, Transportation Charges

Transportation charges – sold for a delivered price

Tax applies to charges for the transportation of property to the purchaser when the property is sold for a delivered price.

Property is sold for a delivered price when the price of the property agreed upon in the contract for sale includes whatever cost or charge may be made for transportation of the property directly to the purchaser. However, property is not sold for a delivered price when the price is agreed upon and to this price is added a separately stated amount representing the cost or charge for transportation of the property directly to the purchaser and any increase or decrease in the actual transportation cost is borne by or credited to the purchaser.

However, tax does not apply to transportation charges to the purchaser when 1) the transportation charges are separately stated, 2) the transportation is from the retailer's place of business or other shipment point is made directly to the purchaser, and 3) the transportation occurs after the sale of the property is made to the purchaser (i.e., the sale occurs before the transportation to the purchaser commences). Also, the amount that may be excluded from tax cannot exceed the cost of transportation.

When the sale occurs

References: RTC section 6011, RTC section 6012, and Regulation 1628, Transportation Charges

Exempt from Tax by Statute

Animal life, feed, seeds and plants whose products are food for human consumption, fertilizer

An exemption from tax applies to 1) animals and feed for animals that are ordinarily considered food for human consumption (food animals); 2) seeds and plants that the products of which ordinarily constitute food for human consumption or are to be resold in the regular course of business; and 3) fertilizer applied to land the products of which are to be used as food for human consumption or sold in the regular course of business.

References: RTC section 6358, Regulation 1587, Animal Life, Feed, Drugs and Medicines, and Regulation 1588, Seeds, Plants and Fertilizer

Blood storage units

The sale or use of any container used to collect or store human blood, plasma, blood products, and blood derivatives, including any disposable tubing, filters, grommets, and needles sold along with the container and held in a blood bank is exempt from tax.

Reference: RTC section 6364.5

Buddy poppies and similar lapel pins

The sale and use of a "Buddy Poppy" or any other symbolic, impermanent lapel pin that memorializes U.S. military veterans killed in foreign wars of the U.S. by any corporation established by Congress under chapter 2301 of title 36 of the United States Code is exempt from tax.

Reference: RTC section 6360.1

Drugs and medicines furnished by veterinarians

Licensed veterinarians are the consumers of drugs and medicines used or furnished in the performance of their professional services and as such, they are not sellers of drugs and medicines used or furnished in the performance of their services and tax applies with respect to the sale of such drugs and medicines to them.

However, there is an exemption for drugs or medicines, including oxygen, the primary purpose of which is the prevention or control of disease, that are administered to animal life the products of which ordinarily constitute food for human consumption.

References: RTC section 6018.1 and RTC section 6358

Food products for human consumption

Tax does not apply to "food products" for human consumption.

Exempt food products include, but are not limited to cereal, meat and meat products, fish and fish products, eggs and egg products, vegetables, fruit, spices, salt, sugar, candy, gum, coffee, tea, milk and milk products, fruit or vegetable juices, and bottled water.

The exemption for food products does not apply when food products are sold as hot prepared food products. Also, exempt food products do not include, for example, alcoholic beverages, carbonated beverages, effervescent bottled water, mineral oils, or dietary supplements.

References: RTC section 6359, Regulation 1602, Food Products, and Regulation 1603, Taxable Sales of Food Products

Health and Safety Materials

The use of health and safety educational materials and insignia routinely sold in connection with health and safety classes and first aid classes are exempt from use tax if the materials are: 1) purchased or sold by a qualifying nonprofit national organization which disseminates such information, and 2) purchased from a national office or a branch or chapter of such national office of the same organization.

Reference: RTC section 6409

Medical identification tags

The sale and use of medical identification tags is exempt from tax when the tags are furnished by a qualifying organization.

Reference: RTC section 6371

Medicines

Tax does not apply to sales of medicines, as defined in RTC section 6369, when certain conditions are met.

Sales of medicines are exempt from tax when the medicine is:

Prescribed for treatment of a human being by a person authorized to prescribe the medicine and dispensed on prescription by a registered pharmacist,
Furnished by a licensed physician and surgeon, podiatrist, or dentist to a patient for treatment,
Furnished by a health facility (as defined in Health and Safety Code section 1250), including a clinic (as defined in Health and Safety Code section 1200) for treatment of a person pursuant to the order of a licensed physician and surgeon, dentist, or podiatrist,
Sold to a licensed physician and surgeon, podiatrist, dentist, or health facility (as defined in section 1250), including a clinic (as defined in section 1200) for the treatment of a human being.
Sold to this state or any political subdivision or municipal corporation thereof, for use in the treatment of a human being,
Furnished without charge by a pharmaceutical manufacturer or distributor to a licensed physician, surgeon, dentist, podiatrist, or a health facility (as defined in section 1250), including a clinic (as defined in section 1200), for the treatment of a human being, or to an institution of higher education for instruction or research if such medicine can only be dispensed for the treatment of a human being and pursuant to a prescription issued by a person authorized to prescribe medicines, or
Furnished for the treatment of a human being by a medical facility or clinic maintained by this state or any political subdivision or municipal corporation.

References: RTC section 6369 and Regulation 1591, Medicines and Medical Devices

Ophthalmic materials (for example, corrective eyeglasses and lenses)

Licensed optometrists, physicians, surgeons, and pharmacists, and registered dispensing opticians are the consumers of ophthalmic materials used or furnished in the performance of their professional services. As such, they are not sellers of ophthalmic materials used or furnished in the performance of their services and tax applies with respect to the sale of such materials to them.

References: RTC section 6018 and Regulation 1592, Eyeglasses and Other Ophthalmic Materials

Printed sales messages

"Printed sales messages" are limited to catalogs, letters, circulars, brochures, and pamphlets printed for the principal purpose of advertising or promoting goods or services.

Tax does not apply to the retail sale or use of printed sales messages which are:

Printed to the special order of the purchaser;
Mailed or delivered by the seller, the seller's agent or a mailing house acting as the agent for the purchaser, through the United States Postal Service or by common carrier.
Received by any person other than the purchaser at no cost to that person who becomes the owner of the material.

If the above conditions are not met, tax applies to retail sales of the printed material.

References: RTC section 6379.5 and Regulation 1541.5, Printed Sales Messages

Vehicle modifications for handicapped persons

Sales and purchases of property used to modify vehicles for physically handicapped persons are exempt from tax.

References: RTC section 6369.4 and Regulation 1591.3, Vehicles for Physically Handicapped Persons

Wheelchairs, crutches, canes and walkers

Tax does not apply to sales and purchases of wheelchairs, crutches, canes, quad canes, white canes for the legally blind, and walkers, and replacement parts for these devices when sold to an individual for personal use as directed by a licensed physician.

References: RTC section 6369.2 and Regulation 1591.2, Wheelchairs, Crutches, Canes, and Walkers

Partial Tax Exemptions

Farming equipment and machinery

In general, tax applies to the sale of farm equipment and machinery. However, certain sales, purchases and leases of farm equipment and machinery may qualify for a 5 percent partial exemption from the applicable tax rate (that is, from the statewide tax rate of 7.25 percent plus district tax, if applicable).

The partial exemption from tax applies when the farm equipment and machinery is:

Sold to a qualified person (see below).
Used exclusively or primarily (50 percent or more of the time) in producing and harvesting agricultural products.
Qualified property (see below).

Qualified person

A qualified person, for purposes of the partial exemption, is one whose business falls within the specified Standard Industrial Classification (SIC) Codes listed below:

Ranchers, farmers and other growers who operate businesses described in SIC Codes 0111 to 0291.
A person who assists a qualified rancher, farmer, or grower by performing a service described in SIC Codes 0711 to 0783.

Qualified property

Farm equipment and machinery for purposes of the partial exemption means implements of husbandry:

Implements of husbandry include any new or used tool, machine, equipment, appliance, device or apparatus used in the conduct of agricultural operations, except where such items are intended for sale in the ordinary course of business.
Such items include, but are not limited to, combines, harrows, tractor implements, agricultural heating and cooling equipment, fuel storage equipment, wind machines, handling and packing equipment and conveyors, ginning equipment, feeding, watering and waste disposal systems for livestock, incubators and equipment used for egg and poultry production, harvesting trays and bins, farm tools such as rakes and hoes, plant support equipment such as trellis systems, irrigation systems, fencing systems, milking systems, agricultural operating structures, squeeze chutes, portable panels, corrals, loading chutes, veterinary instruments, free stalls, cages and tack items such as saddles and rope.
Implements of husbandry also include any new or used vehicle, which is used exclusively in the conduct of agricultural operations, such as farm tractor, but do not include a vehicle whose existing design is primarily for the transportation of persons or property on a highway, unless such vehicle is otherwise specified as an implement of husbandry in the Vehicle Code.

For more explanation about what qualifies as farm equipment and machinery, see Regulation 1533.1, Farm Equipment and Machinery.

References: RTC section 6356.5, and Regulation 1533.1, Farm Equipment and Machinery

Manufacturing, research & development, and electric power generation or storage and distribution businesses

Certain manufacturers, research and developers, and electric power generation or storage and distribution businesses may be eligible for a partial sales and use tax exemption on their purchase or lease of "qualified" tangible personal property that will be used primarily (50 percent or more of the time) in specified activities related to their business.

To be eligible for the partial exemption, a person must meet all three of the following conditions:

Be primarily engaged in certain types of businesses, also known as a "qualified person,"
Purchase "qualified tangible personal property," and
Use the qualified tangible personal property in a "qualified manner."

The current partial exemption rate is 3.9375 percent. That means the sale of qualifying property sold to a qualified person should be taxed at a rate of 3.3125 percent (7.25 percent current statewide rate – 3.9375), plus any applicable district taxes. You can lookup tax rates by city, county, or address on our webpage, California City & County Sales & Use Tax Rates.

Qualified person

Currently, a qualified person means a person who is primarily engaged (50 percent or more of the time) in those lines of business described in Codes 3111 to 3399, inclusive, 221111 to 221118, inclusive, 221122, 541711, or 541712 of the North American Industry Classification System (NAICS) published by the U.S. Office of Management and Budget, 2012 edition.

The businesses in the above specified NAICS codes include manufacturing, research and development, and electric power generation or storage and distribution.

A "qualified person" generally does not include:

An apportioning trade or business that is required to apportion its business income pursuant to subdivision (b) of RTC section 25128, or
A trade or business conducted wholly within this state that would be required to apportion its business income pursuant to subdivision (b) of RTC section 25128 if it were subject to apportionment pursuant to RTC section 25101.

However, currently, the above exclusions from the definition of "qualified person" do not apply to an agricultural trade or business.

Qualified tangible personal property

In general, qualified tangible personal property currently includes:

Machinery and equipment,
Equipment or devices used or required to operate, control, regulate, or maintain the machinery together with all repair and replacement parts with a useful life or one or more years,
Specified tangible personal property used in pollution control,
Special purpose buildings and foundations used as an integral part of the manufacturing, processing, refining, fabricating, or recycling process, or that constitute a research or storage facility used during those process, and
Special purpose buildings and foundations used as an integral part of the generation or production or storage and distribution of electric power.

Qualified tangible personal property must generally be treated as having a useful life of one or more years for state income or franchise tax purposes. Qualified tangible personal property does not include furniture, inventory, and equipment used in the extraction process, or equipment used to store finished products that have completed the manufacturing, processing, refining, fabricating, or recycling process, or tangible personal property used primarily in administration, general management, or marketing.

Qualified uses

Qualified uses include the use of qualified tangible personal property primarily (50 percent or more of the time) in one of the following:

Any stage of the manufacturing, processing, refining, fabricating or recycling of tangible personal property, or
Research and development, or
To maintain, repair, measure, or test any qualified tangible personal property described by the above, or
The generation or production or storage and distribution of electric power, or
Purchased for use by a contractor purchasing that property for use in the performance of a construction contract for a qualified person provided that the qualified person will use the resulting improvement to real property as an integral part of the manufacturing, processing, refining, fabricating, or recycling process, the generation or production, or storage and distribution, of electric power, or as a research or storage facility for use in connection with those processes.

Qualified persons that make a qualifying purchase or lease must provide the seller with a partial exemption certificate in order for the seller to claim the partial exemption on their sales and use tax return.

Sellers, including out-of-state retailers, who make sales subject to the partial tax exemption, must obtain a timely exemption certificate from their customer to document a partially exempt sale or lease to a qualified person. An exemption certificate is considered timely if it is taken any time before the seller bills the purchaser for the property, any time within the seller's normal billing or payment cycle, or any time at or prior to delivery of the property to the purchaser.

There are two sample certificates available on our website to document the partial exemption:

Any document may be regarded as a partial exemption certificate as long as it contains the following:

The signature of the purchaser, the purchaser's agent, or the purchaser's employee,
The name address, and telephone number of the purchaser,
The purchaser's seller's permit number, or if the purchaser is not required to hold a seller's permit, a notation to that effect and the reason,
A statement that the property purchased is:
- To be used primarily for a qualifying activity, or
- For use by a contractor performing a construction contract for a qualified person.
A statement that the purchaser is:
- A qualified person primarily engaged in a qualifying line of business, or
- A contractor performing a construction contract for a qualified person.
A statement that the property purchased is qualified tangible personal property,
A description of the property purchased,
The date of execution of the document.

For more information, see our online guide, Tax Guide for Manufacturing and Research & Development Equipment Exemption

References: RTC section 6377.1 and Regulation 1525.4, Manufacturing and Research & Development Equipment

Special Taxes and Fees

Covered California Electronic Waste Recycling Fee

The Covered Electronic Waste Recycling Fee (commonly referred to as the "eWaste" fee) is assessed on the retail purchase or lease of "covered electronic devices" or CEDs, which are video display products that the Department of Toxic Substances Control has determined to be hazardous when discarded.

These products include computer monitors, laptops, portable DVD players with LCD screens, "bare" cathode ray tubes (CRTs) and devices containing CRTs, televisions with LCD screens, plasma screens, or CRTs. The eWaste fee rate is variable and is determined by the screen size. You may find the fee rates on our website on the Tax Rates – Special Taxes and Fees page, and select Electronic Waste Recycling Fee.

Retailers responsible for collecting the eWaste fee on their sales of CEDs are required to register for an eWaste Recycling Fee account in addition to registering for a seller's permit or Certificate of Registration-Use Tax.

For more information, please see our Covered Electronic Waste Recycling Fee.

References: (Public Resources Code (PRC) 42460-42486)

Lead-acid battery fees

Sales and purchases of lead-acid batteries may be subject to the California Battery Fee and/or the Manufacturer Battery Fee.

California Battery Fee

A California Battery Fee of one dollar ($1.00) through March 31, 2022, and two dollars ($2.00) on and after April 1, 2022, is imposed on the purchase of a replacement lead-acid battery at retail for specified uses. A dealer/retailer is required to charge and collect the fee on the retail sale of a replacement lead-acid battery to a purchaser in California.

For purposes of the lead-aid battery fees, a "lead-acid battery" is a battery weighing more than five kilograms (about 11 pounds) that is primarily composed of both lead and sulfuric acid (liquid, solid, or gel) with a capacity of six or more volts used for any of the following purposes:

As a starting battery that is designed to deliver a high burst of energy to an internal combustion engine until it starts,
As a motive power battery that is designed to provide the source of power for propulsion or operation of a vehicle, including a watercraft,
As a stationary storage or standby battery that is designed to be used in systems where the battery acts as electrical storage for electricity generation equipment or a source of emergency power or otherwise serves as a backup in case of failure or interruption in the flow of power from the primary source, or
A source of auxiliary power to support the electrical systems in a vehicle (as defined in Vehicle Code section 670 and section 36000) or an aircraft.

A replacement "lead-acid battery" is a new lead-acid battery sold at retail after the original sale or lease of the vehicle, equipment, watercraft, or aircraft in which the lease-acid battery is intended to be used. The California battery fee only applies to replacement lead-acid batteries used for purposes 1, 2, or 4 (above).

A dealer/retailer responsible for collecting the lead-acid battery fee is required to register for a California Battery Fee account in addition registering for a seller's permit or Certificate of Registration – Use Tax.

Manufacturer Battery Fee

A Manufacturer Battery Fee of one dollar ($1.00) is imposed on a manufacturer for each lead-acid battery (as defined above) it sells at retail to a person in California, or sells to a dealer, wholesaler, distributor, or other person for retail sale in California.

In general, the manufacturer of a lead-acid battery is the person who manufactures a lead-acid battery and who sells, offers for sale, or distributes the lead-acid battery in the state. However, if there is no person that meets that description who is subject to the jurisdiction of this state, the manufacturer is the person who imports the lead-acid battery into the state for sale or distribution.

A manufacturer is required to register for a Manufacturer Battery Fee account, and pay the manufacturer battery fee to CDTFA.

A manufacturer who makes retail sales of lead-acid batteries directly to consumers in California is also a dealer/retailer and required to register for a California Battery Fee account in addition to registering for a seller's permit or a Certificate of Registration – Use Tax.

For more information, see our online Tax Guide for Lead-Acid Battery Fees.

References: Health and Safety Code 25215-25215.75

Lumber Products Assessment

An assessment is imposed on persons who purchase lumber products or engineered wood products for storage, use, or other consumption in California, at the rate of one percent (1%) of the sales price. Retailers of lumber products or engineered wood products are required to collect the one percent assessment from the purchaser on their sales of these items to consumers in California.

In general, lumber products and engineered wood products subject to the one percent lumber products assessment are building products, usually used in construction, which are comprised of at least 10% wood.

Retailers responsible for collecting the one percent lumber products assessment on sales of lumber products or engineered wood products are required to register for a Lumber Assessment account in addition to registering for a seller's permit or Certificate of Registration-Use Tax.

For more information, please see our online Tax Guide for California Lumber Products Assessment.

Reference: PRC 4629-4629.13

Prepaid Mobile Telephony Services (MTS)

Sellers of prepaid mobile telephony services (MTS), such as prepaid minutes and airtime, have certain surcharge and local charge collection requirements.

Beginning January 1, 2020, sellers of prepaid mobile telephony services (MTS) will be required to collect, report, and pay the Emergency Telephone Users (911) Surcharge as a flat fee on each purchase of prepaid MTS made by a prepaid MTS consumer. The 911 Surcharge will be due on each retail transaction that involves a sale of prepaid MTS to a California consumer, unless otherwise exempt.

Sellers of prepaid MTS must continue to collect local charges as a percentage of total prepaid MTS retail sales (if local charges apply).

The 911 Surcharge and local charges (if local charges apply) generally applies to amounts charged for:

Prepaid wireless airtime cards
Prepaid wireless cards compatible with pay-as-you-go cell phones
Prepaid wireless minutes
Prepaid wireless plans
Prepaid wireless refill or top-off cards
Prepaid wireless ‘e-Cards’
Prepaid mobile data or any other services when sold with any of the above
Any product or service (except a cell phone), when sold with prepaid MTS for a single non-itemized price
A cell phone sold with prepaid MTS for a single non-itemized price, unless only a minimal amount of prepaid MTS is transferred. (A minimal amount of prepaid MTS is $5 or less, or 10 minutes or less)

The current 911 Surcharge rate and local charge rates may be found on our 911 Surcharge and Local Charge Rates webpage.

If you sell prepaid wireless products and services to California consumers, you must register with the CDTFA as a prepaid MTS seller. The prepaid MTS account is a separate account from your seller's permit. For more information about your collection requirements as a sellers of prepaid MTS, please see our Tax Guide for Sellers of Prepaid Mobile Telephony Services (MTS) and Telecommunication Service Suppliers.

Tire Fee

The California Tire Fee is imposed on the retail purchase of new tires for use in California and the fee is currently $1.75 per new tire. A retailer that sells new tires is required to collect the tire fee on its retail sales of new tires and pay the fee to CDTFA.

In addition, a lessor of new or used motor vehicles, trailers, farm equipment, or construction equipment that purchases vehicles or equipment on which new tires are mounted without paying the tire fee is required to collect and pay the fee to CDTFA.

Tires that are subject to the fee are new solid or pneumatic (that is, a tire inflated, or capable of inflation, with compressed air) tires that are intended for use with, but sold separately from:

On-road, or off-road motor vehicles,
Motorized equipment,
Construction equipment, or
Farm equipment.

Tires subject to the fee also include new tires, including the spare, that are sold with the purchase of:

New or used motor vehicles,
New or used trailers drawn upon a highway or road,
New or used farm equipment, or
New or used construction equipment.

Retreaded, reused, or recycled tires are not subject to the fee.

Retailers of new tires for use in California responsible for collecting the tire fee and lessors purchasing vehicles or equipment on which new tires are mounted without paying the tire fee are required to register for a California Tire Fee account in addition to registering for a seller's permit or Certificate of Registration-Use Tax.

For more information, please see our California Tire Fee webpage.

Reference: PRC 42860-42895

Disclaimer

This page summarizes the law and applicable regulations in effect when it was written. However, changes in the law or in regulations may have occurred since that time. If there is a conflict between text on this webpage and the law, the decision will be based on the law and not on this webpage.