SALES AND USE TAX-TERMS AND DEFINITIONS - 8481

(New: 01/2021)

The California Department of Tax and Fee Administration (CDTFA) administers the state’s sales and use tax program and numerous other special tax and fee programs that fund specific state and local programs. The CDTFA website provides detailed information on sales and use tax, including guides, manuals, and forms. Some commonly used CDTFA terms and definitions are:

 

Sales tax is a tax imposed on the retail sale of tangible personal property in California. The retailer of tangible personal property must pay sales tax to the CDTFA, not the purchaser. The retailer may collect reimbursement of the sales tax from the purchaser during retail sales transactions.

 

Use tax generally applies to the storage, use, or other consumption of tangible personal property in California. Use tax is a companion to the sales tax. Persons, or businesses, generally owe use tax when they use, store, give away, or consume physical products in California if they did not pay California sales tax on their purchase.  Use tax may also apply to purchases shipped to a California consumer from another state, including purchases made by mail order, telephone, or the Internet. Use tax generally applies to untaxed purchases from out-of-state sellers. The use tax rate for a California location is the same as the sales tax rate.

 

A Seller’s Permit must be obtained by every person desiring to engage in business as a seller of tangible personal property, subject to sales tax. 

 

State Government entities, other than California state and local government entities, are not “persons” for sales and use tax purposes. Sales by and purchases from such governmental entities are not subject to tax. The use of property in California by other states is not taxable. However, sales in California to other states are subject to sales tax.  See CDTFA Sales and Use Taxes:  Exemptions and Exclusions publication 61.