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Business Taxes Law Guide—Revision 2024

Sales and Use Tax Annotations


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S


495.0000 Sale

Annotation 495.0672

(c) Time and Place of Sale


495.0672 Time of Sales Tax Liability. Payment of sales tax is on an accrual basis and not on a cash basis. Sales tax must be reported and paid with the return for the period in which the sale occurs. The timing of the payment for the sales is not relevant to the timing of a taxpayer's liability for sales tax, nor is the timing of the taxpayer's invoice (except when the timing of the invoice or payment affects the timing of title passage).

For example, if the taxpayer invoices and receives payment for property during one period and makes the actual sale during the next reporting period, the taxpayer must report and pay the tax with the return for the second reporting period, when the sale occurred, not the first reporting period during which the taxpayer invoiced and received payment. Similarly, if the taxpayer makes a sale in one reporting period and invoices and receives payment in the next reporting period, the taxpayer must report and pay the tax with the return for the first reporting period, when the sale occurred, not the second reporting period when the taxpayer invoiced and received payment. If the taxpayer receives progress payments for its sale over four reporting periods and transfers possession of the subject property to the purchaser in the third reporting period, the taxpayer would owe all the sales tax due with the return for a single period. The reporting period would be the one in which the sale occurred. Since the taxpayer would have transferred possession during the third reporting period, the sale would occur no later than that reporting period. (Cal. U.C.C. § 2401.) However, if title passed prior to that reporting period, the taxpayer would owe tax prior to the third reporting period. If, for example, the contract of sale provided that title would pass to the purchaser as soon as 30 percent of the purchase price was paid, the tax would be due with the return for the period in which 30 percent of the purchase price was paid. 10/21/96.