district tax

Local and District Tax Information for Out-of-State Retailers

As a registered out-of-state retailer, we understand that allocating local tax correctly, and knowing the proper district tax rate to collect on your retail sales delivered into California can be complicated. The California Department of Tax and Fee Administration (CDTFA) is here to help with your local and district tax questions. This notice provides general information and examples that may help you better understand local and district taxes.

Local tax

Local taxes are sales and use taxes imposed by local jurisdictions, usually cities or counties, under the Bradley-Burns Uniform Local Sales and Use Tax Law. When you make retail sales in California or for delivery into California, that are not otherwise tax exempt, the sale is subject to the current statewide sales and use tax rate of 7.25 percent, which includes local tax.

When filing your sales and use tax return, you must properly allocate the local tax. This ensures the local jurisdictions will receive the correct funding of local tax. When sales tax does not apply, for example when the sale is made outside the state, use tax generally applies to the use, storage, or other consumption of tangible personal property purchased from a retailer for use in California.

Generally, sales tax transactions should be allocated directly to the local jurisdiction where the sale occurred, using Schedule C; while use tax transactions usually allocated indirectly to the county of the jurisdiction where the property is used, using Schedule B.

District taxes are voter-approved transactions (sales) and use taxes imposed by cities, counties, and other local jurisdictions. Total sales and use tax rates are higher than the current statewide sales and use tax rate of 7.25 percent in areas where district taxes are imposed. When filing your sales and use tax return, you must properly report district taxes on Schedule A.

You may be required to collect, report, and pay district tax for property you ship to your California customers in taxing districts where you are “engaged in business.” A retailer is “engaged in business” in a district if the retailer:

Owns or leases any real or tangible personal property including, but not limited to, a computer server, in the district.
Maintains, occupies, or uses, directly or indirectly, or through a subsidiary or agent, a permanent or temporary office, place of distribution, sales or sample room, warehouse or storage place, or other physical place of business in the district.
Has a representative, agent, or independent contractor operating in the district on your behalf or under your authority, or under the authority of a subsidiary, for purpose of making sales, taking orders, assembling or installing merchandise, training customers, making deliveries, or otherwise establishing or maintaining a market for your products.
Receives rental payments from the leases of tangible personal property located in the district, such as leases of machinery, equipment, and furniture.
Sells or leases vehicles or undocumented vessels which will be registered in the district.
Has total combined sales of tangible personal property in California or for delivery in California, by the retailer and all persons related* to the retailer, exceeding $500,000 in the preceding or current calendar year.

Therefore, if you are an out-of-state retailer engaged in business in a taxing district, as provided above, you may also be responsible for applicable district taxes.

*A person is related to a retailer if they have a relationship with the retailer described in Internal Revenue Code section 267(b) and the related regulations.

District tax rates

You may find the tax rates for each district on our California City and County Sales and Use Tax Rates webpage. Our webpage, Find a Sales and Use Tax Rate, is also available which provides a look-up tool that allows you to find a tax rate based on an address.

For more information

We encourage you to read our Local and District Tax Guide for Retailers on our website, for more information and examples on local and district taxes. If you have questions regarding this notice, you may call our Customer Service Center at 1‑800‑400‑7115 (CRS:711). Customer service representatives are available to assist you Monday through Friday from 8:00 a.m. to 5:00 p.m. (Pacific time), except state holidays.

Introducing Our New Online Tax Guide for Local and District Taxes

The California Department of Tax and Fee Administration (CDTFA) has created a new online tax guide, Local and District Tax Guide for Retailers. The guide helps to assure you collect, report, and pay the correct tax rate for each transaction.

New online guide overview

The CDTFA understands that allocating local tax and determining whether district tax applies to your sales or use tax transactions can be complicated. This new online guide is intended to help you properly allocate local tax and determine how district taxes apply to your business transactions. The guide contains helpful examples and important local tax and district tax information for retailers such as lessors, construction contractors, those with multiple locations, those making sales over the Internet, those making sales into California from out‑of‑state, and more.

What is local tax?

Local taxes are imposed by local jurisdictions, usually cities or counties. Sales and use tax transactions are allocated to the city or county where the sale or use occurs. The one (1.00) percent “Local Jurisdiction” portion goes to the city or county where the sale or use occurs. The one quarter (.25) percent “Local Transportation Fund” portion always goes to the county where the sale or use occurs.

What is district tax?

District taxes are voter-approved transactions (sales) and use taxes imposed by cities, counties, and other local jurisdictions (district). District tax rates are added to the current 7.25 percent statewide sales and use tax rate making the tax rate higher in some districts.

Find your tax rate

You can find all the tax rates in the state on our website. Please see our California City and County Sales and Use Tax Rates. To find a sales and use tax rate by address, select the link Look up the current sales and use tax rate by address. Be sure the address information you input is the address you intended. The tax rate given will reflect the current rate of tax for the address entered.

New Operative Date of April 25, 2019, for District Use Tax Collection Requirement Based on $500,000 Sales Threshold

The California Legislature recently passed Senate Bill (SB) 92 (Stats. 2019, ch. 34), which changes the operative date of the new district use tax collection requirement based on a $500,000 sales threshold from April 1, 2019 to April 25, 2019. As explained in our prior Special Notice L-632, under the new law, all retailers are required to collect and remit the district use tax on all sales made for delivery in any district that imposes a district tax if, during the preceding or current calendar year the total combined sales of tangible personal property in this state or for delivery in this state by the retailer and all persons related to the retailer exceed $500,000.

Assembly Bill (AB) 147 (Stats. 2019, ch. 5) established the new district use tax collection requirement with an operative date of April 1, 2019, and was signed into law on April 25, 2019. Changing the operative date to April 25, 2019, therefore, eliminates the retroactive effect of AB 147 with regard to the new district use tax collection requirement.

Please note that SB 92 does not change the operative date of the new state use tax collection requirement based on $500,000 in combined sales for delivery in California. The operative date of the new state use tax collection requirement is still April 1, 2019.

What are district taxes?

District taxes are voter-approved transactions (sales) and use taxes imposed by cities, counties, and other local jurisdictions. The current statewide California sales and use tax rate is 7.25 percent. In areas where a district tax is imposed (taxing district), the total tax rate includes the statewide rate plus the district tax rate(s).

Who is responsible for paying the district tax?

District sales taxes are due from retailers on their sales of tangible personal property and district use taxes are due from purchasers for their use of tangible personal property in a taxing district. However, a retailer that is “engaged in business” in a taxing district is generally required to collect the district’s use tax and pay it to the California Department of Tax and Fee Administration (CDTFA) on sales of tangible personal property delivered in the district. For more information on being engaged in business in a district, see publication 44, District Taxes (Sales and Use Taxes).

New operative date for new district use tax collection requirement

If you exceeded the $500,000 district use tax collection sales threshold in calendar year 2018 or during the period from January 1, 2019, through April 24, 2019, then starting on April 25, 2019, you were considered engaged in business in every district imposing a district tax and are required to collect, report, and pay the district use tax to the CDTFA on all sales made for delivery in those districts. You are not responsible for collecting, reporting, and paying the district use tax to the CDTFA on sales made for delivery in a taxing district prior to April 25, 2019, unless you were otherwise engaged in business in that district. However, if you have already collected district use tax from your customers on sales made prior to April 25, 2019, either at the time of the sale or at a later date, you must report and pay the collected tax amounts to the CDTFA on your sales and use tax return.

If you are otherwise engaged in business in a district, your responsibility to collect and pay the district use tax is not affected by the new collection requirement or the change in operative date, and you should continue to collect, report, and pay the district tax on all sales made for delivery into that district(s).

Tax rates in California

You may find the tax rates for each district on our website at www.cdtfa.ca.gov/taxes-and-fees/sales-use-tax-rates.htm. This webpage also includes a look-up tool, Find A Sales and Use Tax Rate by Address, located under the Current Tax Rates section