One of the states with special taxing districts is California.People who sell items within the state's borders are required to collect, report, and pay these district taxes if they apply.The following steps will show you how to calculate California sales tax.
Step 1: There is a difference between California sales tax and use tax.
Sales and use taxes differ depending on what purchases are made and whose responsibility it is to pay the tax to the appropriate taxing jurisdiction.Purchases made within the state's borders are subject to sales tax.The business authorized to collect the sales tax has the responsibility of paying it to the state.Use tax applies to items purchased outside the state of California, such as by mail order or online, where buyers don't pay sales tax.It also applies to the purchase of motor vehicles, mobile homes, watercraft, and aircraft from sellers without a California seller's permit and when business owners withdraw taxable merchandise from their inventories for their personal use.The purchaser is usually responsible for payment of use tax.
Step 2: Determine if you have a computer.
If a company is engaged in business in the state of California, it has "nexus".If it maintains a sales office or warehouse, employs a salesperson who is within the state's borders, or gets rental receipts from equipment located inside, it has a connection.California requires businesses to collect, report, and pay sales or use tax.If they work through California affiliates, vendors, or advertisers, an out-of-state retailer may have a connection.There are companies that make sales through internet sales and mail catalogs.Companies that aren't engaged in business are not required to collect, report, and pay California sales or use tax, but many register with the state's Board of Equalization anyway to relieve their customers of the responsibility of paying the tax.
Step 3: Find out if your products are taxed.
California sales tax is charged on the sale of tangible property.Products can be touched, weighed, seen, felt, or measured.All physical products are covered.Cover charges and corkage fees at restaurants are intangible items that are taxed.Groceries and prescription medicines are exempt from California sales or use tax.Writing and plumbing services are not taxed.The service product may be taxed if it is a salable product.There is a complete list of exempt items in the state Board of Equalization's publication.
Step 4: Determine if your customers pay sales tax.
If you make sales to non-profits, you don't need to charge sales tax.You need a valid resale certificate from the charity or non-profit to be eligible.
Step 5: Understand the tax rates.
One of the most complicated sales tax systems in the country is California.California has a hybrid origin-destination system in which the origin and destination of the sale are used to calculate the sales tax.California tax rates are determined using a flat state tax rate of 7.5 percent and then adding one or multiple "district" rates.The district rates add a small amount on top of the standard rate.If you are a seller, you may be able to choose if you collect taxes using origin or destination based calculations.The rates of all districts are applied if the site of a purchase falls in more than one taxing district.For example, a sale might be charged tax at a rate of 9.5 percent, which is calculated from the 7.5 percent state rate plus 1.5 percent country rate and a 0.5 percent district rate.
Step 6: Origin-based sales tax should be collected.
Origin-based sales tax is your first option as a seller.You will only have to pay the statewide sales tax rate if you sell to a district in California that doesn't have a nexus.You will have to pay the total sales tax amount if you sell within your district.Customers in other districts may be liable for their own sales taxes.
Step 7: It was decided to collect destination-based sales tax.
You can charge the total sales tax for each district you sell to.The sales tax rate would be relevant to the destination district.Many large retailers choose this option because they don't have to pay sales taxes.
Step 8: Determine the tax rate for the district.
District tax rates range from 0.1 to 1 percent and are added to the state sales tax rate as a surtax.There may be more than one district tax applied to the sales tax.Depending on the area, tax rates range from 7.5 percent to over 10 percent.The combined rates are listed in the California Board of Equalization's Publication 71: California City and County Sales and Use Tax Rates.The Board of Equalization has a number of resources on sales and use taxes and district taxes.
Step 9: The sales tax rate in California is basic.
The statewide sales tax rate is 7.5 percent.The lowest sales tax rate a seller or consumer can pay is standard across California.
Step 10: Take the total tax rate into account.
Add in any district rates that apply to your sale based on the tax calculation system you are using and the destination of the sale.For a total sales tax rate, take these with the state-wide tax amount.Imagine that a store in San Jose ships a product to a customer in El Monte.If they were to use the destination-based system, the state tax rate would be 7.5 percent, plus a country rate of 1.5 percent for Los Angeles County, and an additional 0.5 percent in El Monte for a total of 9.5 percent.They would simply use the state-wide rate of 7.5 percent if they were using the origin-based system.
Step 11: Take the total tax rate and divide it by the amount of the purchase.
The amount of tax owed is determined by this.You can use an online tax calculator to calculate California sales tax.There is a calculator by Pitney Bowes.There is a calculator at http://www.projectedfinancialstatements.com.It can be used to calculate sales tax rates for California and nine other states.