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Business Taxes Law Guide—Revision 2024

BTLG Table of Contents > Transactions And Use Tax Law > Chapter 2 > entire chapter

Transactions And Use Tax Law

Revenue and Taxation Code

Division 2. Other Taxes
Part 1.6. Transactions and Use Taxes
Chapter 2. Imposition of Tax

7261. Required provisions of the transactions tax. [Repealed by Stats. 1979, Ch. 5, operative January 1, 1984.]

7261. Required provisions of the transactions tax. The transactions tax portion of any transactions and use taxes ordinance adopted under this part shall be imposed for the privilege of selling tangible personal property at retail, and shall include provisions in substance as follows:

(a) A provision imposing a tax for the privilege of selling tangible personal property at retail upon every retailer in the district at a rate of one-eighth of 1 percent, or a multiple thereof, of the gross receipts of the retailer from the sale of all tangible personal property sold by that person at retail in the district.

(b) Provisions identical to those contained in Part 1 (commencing with Section 6001), insofar as they relate to sales taxes and are not inconsistent with this part, except that the name of the district as the taxing agency shall be substituted for that of the state and that an additional transactor's permit shall not be required if a seller's permit has been or is issued to the transactor under Section 6067.

(c) A provision that all amendments subsequent to the effective date of this part to Part 1 (commencing with Section 6001) relating to sales tax and not inconsistent with this part shall automatically become a part of the transactions and use taxes ordinance. However, no amendment shall operate so as to affect the rate of tax imposed by the district's board.

(d) A provision that the amount subject to tax shall not include the amount of sales tax or use tax imposed by the State of California or by any city, city and county, or county pursuant to the Bradley-Burns Uniform Local Sales and Use Tax Law, or the amount of any state-administered transactions or use tax.

(e) A provision that there are exempted from the tax the gross receipts from the sale of tangible personal property, other than fuel and petroleum products, to operators of aircraft to be used or consumed principally outside the county in which the sale is made and directly and exclusively in the use of the aircraft as common carriers of persons or property under the authority of the laws of this state, the United States, or any foreign government.

(f) A provision that sales of property to be used outside the district which are shipped to a point outside the district, pursuant to the contract of sale, by delivery to that point by the retailer or his or her agent, or by delivery by the retailer to a carrier for shipment to a consignee at such point, are exempt from the tax.

For purposes of this section, "delivery" of vehicles subject to registration pursuant to Chapter 1 (commencing with Section 4000) of Division 3 of the Vehicle Code, aircraft licensed in compliance with Section 21411 of the Public Utilities Code, and undocumented vessels registered under Division 3.5 (commencing with Section 9840) of the Vehicle Code shall be satisfied by registration to an out-of-district address and by a declaration under penalty of perjury, signed by the buyer, stating that such address is, in fact, his or her principal place of residence.

"Delivery" of commercial vehicles shall be satisfied by registration to a place of business out of district and a declaration under penalty of perjury, signed by the buyer, that the vehicle will be operated from that address.

(g) A provision that the sale of tangible personal property is exempt from tax if the seller is obligated to furnish the property for a fixed price pursuant to a contract entered into prior to the operative date of the ordinance. A lease of tangible personal property which is a continuing sale of that property is exempt from tax for any period of time for which the lessor is obligated to lease the property for an amount fixed by the lease prior to the operative date of the ordinance. For the purposes of this subdivision, the sale or lease of tangible personal property shall be deemed not to be obligated pursuant to a contract or lease for any period of time for which any party to the contract or lease has the unconditional right to terminate the contract or lease upon notice, whether or not such right is exercised.

History—Added by Stats. 1979, Ch. 5, operative January 1, 1984, Stats. 1984, Ch. 17, effective March 1, 1984, section shall cease to be operative on March 1, 1984, and thereafter this section shall become operative on January 1, 1986, changed paragraph designations, substituted "her" for "him" before "agent" in (a)(6), add (b) at end of section. Stats. 1985, Ch. 838, operative January 1, 1986, substituted "1988" for "1986" in subdivision (b). Stats. 1988, Ch. 1029, in effect January 1, 1989, deleted "of this division" following "(commencing with Section 6001)" in paragraphs (2) and (3) of subdivision (a), deleted "of this code" following "Section 6067" in paragraph (2) of subdivision (a), and substituted "Division 3.5 (commencing with Section 9840) of the Vehicle Code" for "Article 2 (commencing with Section 680 of Chapter 5 of Division 3 of the Harbors and Navigation Code" following "undocumented vessels registered under" and added "or her" following "his" in paragraph (6) of subdivision (a). Stats. 1990, Ch. 74 in effect January 1, 1991, added "his or" to paragraph (6) of subdivision (a). Stats. 1991, Ch. 236, in effect July 29, 1991, substituted "one-quarter" for "one-half" after "at a rate of", added ", or a multiple thereof," after "1 percent" in paragraph (1) of subdivision (a); and added ", other than fuel and petroleum products," after "tangible personal property" in paragraph (5) of subdivision (a). Stats. 1992, Ch. 905, in effect September 25, 1992, operative January 1, 1993, deleted subdivision letter "(a)" in the first paragraph; lettered former paragraphs (1), (2), (3), (4), (5), (6), and (7) as subdivisions (a), (b), (c), (d), (e), (f), and (g), respectively; deleted "; provided," after "taxes ordinance" and created the second sentence from the remainder of the former first sentence, deleted "that" after "However," and "such" before "amendment shall" in the second sentence, of subdivision (c); substituted "the" for "such" after "exclusively in the use of" in subdivision (e); substituted "that" for "such" after "by delivery to" in subdivision (f); substituted "that" for "such " after "continuing sale" in the second sentence of subdivision (g); and deleted former subdivision (b) which stated that "This section shall cease to be operative on March 1, 1984, and thereafter this section shall become operative on January 1, 1988.". Stats. 2012, Ch. 739 (AB 1126), in effect January 1, 2013, substituted "one-eighth" for "one-quarter" after "at a rate of" in subdivision (a).

7262. Required provisions of the use tax. [Repealed by Stats. 1979, Ch. 5, operative January 1, 1984.]

7262. Required provisions of the use tax. [Repealed by Stats. 1986, Ch. 216, effective June 30, 1986.]

7262. Required provisions of the use tax. The use tax portion of any transactions and use tax ordinance adopted under this part shall impose a complementary tax upon the storage, use, or other consumption in the district of tangible personal property purchased from any retailer for storage, use, or other consumption in the district. The tax shall be at a rate of one-eighth of 1 percent, or a multiple thereof, of the sales price of the property whose storage, use, or other consumption is subject to the tax, and the ordinance shall include provisions in substance as follows:

(a) Provisions identical to those contained in Part 1 (commencing with Section 6001), insofar as they relate to use taxes and are not inconsistent with this part, except that the name of the district as the taxing agency shall be substituted for that of the state. The name of the district shall be substituted for the word "state" in the phrase "retailer engaged in business in this state" in Section 6203 and in the definition of that phrase.

The following additional provisions shall be included:

(1) "A retailer engaged in business in the district" shall also include any retailer that, in the preceding calendar year or the current calendar year, has total combined sales of tangible personal property in this state or for delivery in the state by the retailer and all persons related to the retailer that exceeds five hundred thousand dollars ($500,000). For purposes of this section, a person is related to another person if both persons are related to each other pursuant to Section 267(b) of the Internal Revenue Code and the regulations thereunder.

(2) Except as provided in paragraph (3), a retailer engaged in business in the district shall not be required to collect use tax from the purchaser of tangible personal property, unless the retailer ships or delivers the property into the district or participates within the district in making the sale of the property, including, but not limited to, soliciting or receiving the order, either directly or indirectly, at a place of business of the retailer in the district or through any representative, agent, canvasser, solicitor, subsidiary, or person in the district under the authority of the retailer.

(3) "A retailer engaged in business in the district" shall also include any retailer of any of the following: vehicles subject to registration pursuant to Chapter 1 (commencing with Section 4000) of Division 3 of the Vehicle Code, aircraft licensed in compliance with Section 21411 of the Public Utilities Code, or undocumented vessels registered under Division 3.5 (commencing with Section 9840) of the Vehicle Code. That retailer shall be required to collect use tax from any purchaser who registers or licenses the vehicle, vessel, or aircraft at an address in the district.

(b) A provision that all amendments to the provisions of Part 1 (commencing with Section 6001) relating to the use tax and not inconsistent with this part shall automatically become a part of the ordinance. However, no amendment shall operate so as to affect the rate of tax imposed by the district's board.

(c) A provision that the amount subject to tax shall not include the amount of any sales tax or use tax imposed by the State of California or by any city, city and county, or county pursuant to the Bradley-Burns Uniform Local Sales and Use Tax Law (Part 1.5 (commencing with Section 7200)) or the amount of any state-administered transactions or use tax.

(d) A provision that any person subject to a use tax under an ordinance adopted pursuant to this part shall be entitled to credit against that tax or any transactions tax, or to reimbursement for a transactions tax, paid to a district or retailer in a district imposing a transactions and use tax pursuant to this part.

(e) A provision that, in addition to the exemptions provided in Sections 6366 and 6366.1, the storage, use, or other consumption of tangible personal property, other than fuel or petroleum products, purchased by operators of aircraft, and used or consumed by the operators directly and exclusively in the use of the aircraft as common carriers of persons or property for hire or compensation under a certificate of public convenience and necessity issued pursuant to the laws of this state, the United States, or any foreign government, is exempt from the use tax.

(f) A provision that the storage, use, or other consumption in the district of tangible personal property is exempt from the tax if the purchaser is obligated to purchase the property for a fixed price pursuant to a contract entered into prior to the operative date of the ordinance. The possession of, or the exercise of any right or power over, tangible personal property under a lease which is a continuing purchase of the property is exempt from tax for any period of time for which the lessee is obligated to lease the property for an amount fixed by a lease entered into prior to the operative date of the ordinance. For purposes of this subdivision, the storage, use, or other consumption of, or possession of, or exercise of any right or power over, tangible personal property shall be deemed not to be obligated pursuant to a contract or lease for any period of time for which any party to the contract or lease has the unconditional right to terminate the contract or lease upon notice, whether or not the right is exercised.

(g) Any provision in an ordinance that is required to be included pursuant to paragraph (1) of subdivision (a) shall become operative on April 25, 2019.

History—Added by Stats. 1986, Ch. 216, effective June 30, 1986. Stats. 1987, Ch. 308, operative January 1, 1988, deleted first phrase of second paragraph of subdivision (1), "An additional provision shall be included that" and substituted "The following additional provisions shall be included: (A) Except as provided in subparagraph (B)", and added subparagraph (1)(B). Stats. 1988, Ch. 1029, in effect January 1, 1989, substituted "Division 3.5 (commencing with Section 9840) of the Vehicle Code" for "Article 2 (commencing with Section 680) of Chapter 5 of Division 3 of the Harbors and Navigation Code" following "vessels registered under" in subparagraph (B) of paragraph (1) of subdivision (a). Stats. 1991, Ch. 236, in effect July 29, 1991, substituted "one-quarter" for "one- half" after "at a rate of", added ", or a multiple thereof," after "1 percent" in subdivision (a) and added ", other than fuel or petroleum products," after "tangible personal property" in paragraph (5) of subdivision (a). Stats. 1992, Ch. 905, in effect September 25, 1992, operative January 1, 1993, deleted subdivision letter "(a)" in the first paragraph; lettered former paragraphs (1), (2), (3), (4), (5), and (6) as subdivisions (a), (b), (c), (d), (e), and (f), respectively; substituted "paragraph (2)" for "subparagraph (B)" after "Except as provided in" in paragraph (1) of subdivision (a); lettered former subparagraphs (A) and (B) of subdivision (a) as paragraphs (1) and (2), respectively, in subdivision (a); and deleted former subdivision (b) which stated that "This section shall become operative on January 1, 1988.". Stats. 2012, Ch. 739 (AB 1126), in effect January 1, 2013, substituted "one-eighth" for "one-quarter" after "at a rate of" in the first paragraph. Stats. 2019, ch. 5 (AB 147), in effect April 25, 2019, operative October 1, 2019, inserted paragraph (1) in subdivision (a), redesignated former paragraph (1) as paragraph (2), and therein substituted "paragraph (3)" for "paragraph (2)", and redesignated former paragraph (2) as paragraph (3); and added subdivision (g). Stats. 2019, ch. 34 (SB 92), in effect June 27, 2019, operative October 1, 2019, deleted "Title 26 of" and substituted "Internal Revenue" for "United States" in subdivision (a), paragraph (1); and substituted "25" for "1" after "April" in subdivision (g).

Note.—Section 8 of Stats. 2019, ch. 5 (AB 147) specifies: The amendments made to Sections 6203 and 7262 of the Revenue and Taxation Code by this act shall not have any retroactive effect.

7262.2. Adoption of specified provisions by reference. The transactions and use tax ordinance of a district adopted pursuant to this part, shall be deemed to adopt by reference the provisions of Sections 7261 and 7262, as now in effect or as later amended, which are required to be included in the ordinance, regardless of whether or not the ordinance was adopted or amended prior to or after the effective date of this section.

History—Added by Stats. 1985, Ch. 591, effective January 1, 1986.

7262.3. Santa Clara Valley Transportation Authority. Notwithstanding any other provision of law, the Santa Clara Valley Transportation Authority may adopt an ordinance imposing a transactions and use tax at a rate of 0.125 percent, provided that all other provisions of this part and Article 9 (commencing with Section 100250) of Chapter 5 of Part 12 of the Public Utilities Code are complied with by the Santa Clara Valley Transportation Authority.

History—Added by Stats. 2007, Ch. 430 (SB 264), in effect January 1, 2008.

7262.5. County of Mendocino. [Repealed by Stats. 2007, Ch. 343 (SB 144), in effect January 1, 2008.]

7262.6. Fresno Metropolitan Projects Authority. [Repealed by Stats. 2007, Ch. 343 (SB 144), in effect January 1, 2008.]

7262.7. County of Stanislaus. [Repealed by Stats. 2003, Ch. 605 (SB 1060), in effect January 1, 2004.]

7263. Place of sale. For the purposes of a transactions tax imposed by an ordinance adopted pursuant to this part, all retail transactions are consummated at the place of business of the retailer unless the tangible personal property sold is delivered by the retailer or his agent to an out-of-state destination or to a common carrier for delivery to an out-of-state destination. The gross receipts from such sales shall include delivery charges, when such charges are subject to the state sales and use tax, regardless of the place to which delivery is made. In the event a retailer has no permanent place of business in the state or has more than one place of business, the place or places at which the retail sales are consummated for the purpose of a transactions tax imposed by an ordinance adopted pursuant to this part shall be determined under rules and regulations to be prescribed and adopted by the board.

7264. Deduction of tax by Controller. [Repealed by Stats. 1989, Ch. 1027, in effect September 29, 1989, operative January 1, 1990.]

7264.1. Repayment of tax by Controller. [Repealed by Stats. 1989, Ch. 1027, in effect September 29, 1989, operative January 1, 1990.]

7265. Operative date of ordinance. No ordinance adopted pursuant to this part shall be operative on other than the first day of a calendar quarter, or prior to the first day of the first calendar quarter, commencing more than 110 days after the adoption of the ordinance.

History—Added by Stats. 1974, Ch. 532, effective August 23, 1974. Stats. 1989, Ch. 274, in effect January 1, 1990, deleted "(a) Except as otherwise provided in subdivision (b)," before "No ordinance", substituted "110" for "120", and deleted subdivision (b).

7267. Unconstitutional or invalid taxes. (a) Except as provided in Chapter 4 (commencing with Section 7275), there shall be no recovery from the state for the imposition of any unconstitutional or otherwise invalid tax that is levied in conformity with this part.

(b) If a final and nonappealable decision of a court of competent jurisdiction determines that a district transactions and use tax is unconstitutional or otherwise invalid, the district, the county, or the city, as the case may be, shall transfer to the board the revenues derived from the unconstitutional or invalid transactions and use taxes necessary to reimburse claimants for the unconstitutional or invalid transactions and use taxes paid, including interest allowed under Section 6907. The board shall deposit these revenues in a segregated impound account in the Retail Sales Tax Fund, as described in Section 7275, and shall administer any refunds necessitated by the court's decision in accordance with the guidelines set forth in Chapter 4 (commencing with Section 7275) to the extent feasible and practical.

(c) After the refund process described in subdivision (b) is completed, any revenue from an unconstitutional or otherwise invalid tax described in subdivision (a) that is paid to the board shall be transmitted by the board to

the district or its successor in accordance with Section 7271. However, unless the ordinance specifies otherwise, if at the time the board is making those transmittals the district that imposed the tax has no successor, or has disbanded, dissolved, or is otherwise no longer functioning, the board shall transmit those revenues in the following manner:

(1) If the tax levied by the district was imposed on a countywide basis, the revenues shall be transmitted to the county's general fund.

(2) If the tax levied by the district was imposed on a citywide basis, the revenues shall be transmitted to the city's general fund.

(3) If the tax levied by the district was imposed on a basis other than in paragraph (1) or (2), the revenues shall be transmitted to the general fund of each taxing jurisdiction located wholly within the district, based on each taxing jurisdiction's proportionate share of revenue from taxes imposed pursuant to the Bradley-Burns Uniform Local Sales and Use Tax Law allocated during the prior calendar year.

(d) The district, or any entity that participated in the formation of the district, shall reimburse the board for and hold the board harmless from any and all costs, losses, or refunds of any kind whatsoever, including preparatory costs incurred prior to implementation of the tax.

(e) In the case of any claim for refund of the transactions and use tax imposed by the San Francisco Educational Financing Authority, which was determined to be unconstitutional by the court in Hoogasian Flowers, Inc. v. State Bd. of Equalization, 23 Cal. App. 4th 1264, payment of any of those claims for refund shall be made from the revenues derived from the unconstitutional transactions and use tax collected by and in the possession of the board. When those funds and any other revenues derived from the unconstitutional tax still in the possession of the San Francisco Educational Financing Authority, the City and County of San Francisco, the San Francisco Unified School District, or the San Francisco Community College District are exhausted, any remaining payments of those claims for refund shall be paid from funds of the San Francisco Unified School District and the San Francisco Community College District which benefited from the illegal tax. The remaining payments shall be based on the method by which the San Francisco Educational Financing Authority distributed the proceeds of the tax to the San Francisco Unified School District and the San Francisco Community College District.

History—Added by Stats. 1995, Ch. 495, in effect January 1, 1996.

Note.—Sections 4 and 5 of Ch. 495, Stats. 1995, provide the following:

SEC. 4. The Legislature finds and declares that since transactions and use taxes are imposed by the taxing districts and not the state, the state has no interest in, and should not be a party in, any action to determine the validity of such a tax. It is the intent of the Legislature that the state not be made a party to those actions. However, where a refund claimant is contesting the application of sales or use taxes in general to a particular transaction, the claim should be filed with the State Board of Equalization under the normal refund rules, notwithstanding the fact one of the taxes the application of which is contested is a transactions or use tax which is alleged to be invalid.

SEC. 5. (a) It is the intent of the Legislature that this act be applied retroactively to the fullest extent permitted by the federal and state Constitutions.

(b) The Legislature finds and declares that when it enacted the second paragraph of Section 7270 (designated by this act as subdivision (b) of Section 7270) of the Revenue and Taxation Code, it intended to prevent the State of California from being made liable for refunds of any transactions and use tax which is declared to be unconstitutional or otherwise

invalid. The language of that provision as enacted can, however, be interpreted as having the state assume primary liability for those refunds with the district reimbursing the state. It is the intent of the Legislature in enacting subdivision (a) of Section 7267 of the Revenue and Taxation Code to implement its original intent in this matter and clarify existing law that there shall be no recovery from the state for the imposition of any illegal tax except as specifically otherwise provided by statute. It is intended that the district which levied the illegal tax shall be solely liable for such refunds.

(c) (1) The Legislature enacted Chapter 1060 of the Statutes of 1993 in order to provide a remedy to persons who bore the economic burden of an illegal district tax in the situation where the revenues derived therefrom had been collected by the State Board of Equalization and distributed to the taxing district but had been retained by the district pending the outcome of the litigation over the validity of the latter's tax. The Legislature finds and declares that current law does not require the district to retain those revenues during the litigation and where the district does not do so there is no effective remedy for either taxpayers or those who bore the economic burden of the tax.

(2) The United States Supreme Court, in the case of McKesson v. Division of Alc. Bev., 110 L. Ed 2d 17, declared that the due process clause of the Fourteenth Amendment to the United States Constitution requires that a taxpayer who may only challenge the validity of a tax through a postpayment refund action must be provided meaningful retrospective relief for taxes already paid pursuant to a tax scheme ultimately found unconstitutional. It is the intent of the Legislature in adding subdivision (c) to Section 7270 of the Revenue and Taxation Code to ensure that effective relief is available, notwithstanding the provisions of Section 6931 of the Revenue and Taxation Code.

7269. Limitations; redistributions. The board may redistribute tax, penalty, or interest distributed to a district other than the district entitled thereto, but such redistribution shall not be made as to amounts originally distributed earlier than two quarterly periods prior to the quarterly period in which the board obtains knowledge of the improper distribution.

History—Added by Stats. 2007, Ch. 342 (AB 1748), in effect January 1, 2008.