SALES TAX TUESDAY 2018: California

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We have driven all the way across the country, from the Atlantic to the Pacific, because this week finds us in California which is scheduled for a series of local sales and use tax changes at the city and county levels going into effect April 1, 2018.  Please note that I didn’t say sales and use tax ‘increases’, because in at least 2 cases the City of La Mirada (within Los Angeles County) and the City of Nevada City (located in Nevada County), the rates are actually ‘going down.’

It’s changes like these, and several others including the state agency responsible for administration of sales tax, that make sales tax administration such a nightmare for small businesses. And that’s one reason small businesses need the help that Avalara can provide to keep them on track with sales tax demands.

Thanks to Avalara, Insightful Accountant is publishing Sales Tax Tuesday 2018. As we did back in 2015, we will be covering sales tax issues associated with each and every state tax jurisdiction in the United States as part of our new (2018) 50-part series. So, come take a ride with me in my big RV as we journey from state-to-state looking for what's great, and paying sales taxes all along the way.

But before we get to the ‘sales tax’ nitty gritty, I will also say that California is the home of my good friend, Charlie Russell.  Many of you may not know that in addition to his QuickBooks expertise, Charlie is quite the nature photographer, and key among his photographic loves are wildflowers.  Over the years, Charlie has recorded numerous nature hikes in photographic detail, and he has graciously agreed to share some of his California splendor with us.

With more than 39-million residents, California is the most populous state in the United States.  Even though it is only 250 miles at it’s widest, it 770 miles long (from North to South), give it an area of more than 163,000 square miles, 3rd largest in the U.S.

The further south we travel in California, the further back in history we travel as well. In 1821 Mexico won its independence from Spain, and what is today California was at that time part of Mexico’s upper Baha region referred to as ‘Alta California’. In 1846 a group of American settlers in the Sonoma rebelled against Mexico, that same year the Mexican-American War began, and on February 2, 1848 the Treaty of Guadalupe Hidalgo granted Alto California to America.

Conveniently enough, just a few days after the American annexation of California, gold was discovered at Sutter’s Mill. Soon thereafter California held their first Constitutional Convention in Monterey and petitioned the US Congress for statehood in 1850. California was admitted into the United States on September 9, 1850.  By the time Sacramento was established as the capital in 1854, more than 300,000 settlers had rushed to mine for gold in California.

It was quickly determined that much of California was perfect for agriculture including fruit cultivation, as a result wheat, vegetables, cotton, and nut and fruit trees were grown (including oranges in Southern California) became the basis of state's agricultural production in the Central Valley and elsewhere.

Today, California’s largest cities are Los Angeles (3.9-million), San Diego (1.4 million), San Jose (1.1-million), San Francisco (870-thousand), Fresno (520-thousand) and Sacramento (496-thousand). At least four other cities have populations in excess of 350-thousand residents.

As we head north from the border town of Tijuana, we soon approach San Diego called the birthplace of California. This is not only where most of the indigenous original inhabitants were centered but also the place where the first Europeans sailed into. San Diego was the anchor of Alta California and named for the Catholic Saint San Diego de Alcala.

Continuing northward we reach Los Angeles located in a large coastal basin surrounded on three sides by mountains reaching as high as 10,000 feet.  Best know to almost everyone, L.A. is the home to Hollywood, where by 1910, the city’s ideal weather made it the perfect place for film that new-fangled contraption known as ‘moving pictures’. Within 10 years, motion pictured had become the fifth-largest business in our nation.

The actual first ‘movie studio’ opened in 1911 in a roadhouse on Sunset Boulevard. Keystone Studios was founded in 1913, it of course became know for the silent ‘Keystone Cops’ films, and the earliest Charlie Chaplin silent reels in the persona of ‘The Little Tramp’.

In 1919 Chaplin, along with fellow actor Douglas Fairbanks, actress Mary Pickford, and Producer/Director D.W. Griffith, formed United Artists. It was only in 1999 that United Artists became part of Metro-Goldwyn-Mayer Pictures. In 2006, actor Tom Cruise and a production partner revitalized UA, and after 10 years the media group continues to be a major project distributor.

In 1923, a large sign which read Hollywoodland, was erected at the site of a housing development. By 1949 the sign was in serious disrepair, so the City of Los Angeles acquired the rights to the sign and removed the ‘land’ from the name during reconstruction.

As we depart Los Angeles we are going to take one of the most beautiful of all drives, anywhere, on any given day, the roughly 500 miles (8-hour drive time) to San Francisco along the Pacific Costal Highway.  Just about ½-way is San Simeon where we find Hearst Castle, which is today a National Historic Landmark. It was the residence of William Randolph Hearst noted newspaper man and tycoon until his death in 1951.  Three years later it was donated by the Hearst Family to the State of California. 

It is described as a tour like none other, and while tickets start around $25 + $8 service fee, plus sales taxes, but you will spend much more than that because that’s just admission to the grounds. Each of several tours of different parts of ‘the castle’ will be charged at the same rate. It’s not uncommon for people to send a couple of hundred dollars per person. 

As we reach San Francisco it’s easy to see why this beautiful place is considered as the cultural center of California.  San Francisco was founded in 1776 by Spanish colonists who established the Presidio of San Francisco and nearby Mission San Francisco de Asis named for the Catholic Saint Francis of Assisi. San Francisco is known by many nicknames including ‘San Fran’, ‘the City by the Bay’ and ‘the Golden Gate City’.  For me, this is how I shall remember San Francisco, looking out over the bay toward the Golden Gate Bridge from Golden Gate Park.

Heading north-northeast out of the Bay Area we will strive to reach the state’s capital, but before we do, we have a side-trip to take. Turning north at Vallejo we enter California Wine Country, and the further we venture north and before long we reach Napa. Here we find not only the best wines in America, but some of the best wines in the world, despite what ‘the French’ say. 

I wish we had time to stick around in Sacramento, but we just have a few moments to stop-off and catch a photo the ‘state house’.  To me, the contrasting colors of this capital building are some of the most striking of any of the 50 states, especially when the light hits it just right.

But I’m trying to get east of here in this big old RV at someplace Charlie told me about. Big Meadow near Dardanelles Lake.  This is high country starting off at 7200 feet in elevation and getting as high as 8100 feet.  My RV really doesn’t even like this altitude.

From Charlie’s picture you can see why this is a very special place, it’s absolutely spectacular. 

This is where we end our tour of California, although now we need to summarize the Sales Tax details. But if you would love to view, and even purchase, some of Charlie’s beautiful photographs then head over to his website http://wildflowers.russellramblings.com/.

You can imagine with California having the highest combined state, county and local sales taxes in the United States that it is one of the most important sources of revenue. That means, from the perspective of both the new California Department of Tax and Fee Administration as well as the California State Board of Equalization, making sure every sales tax dollar is collected, through audits, fines, penalties rates and rules, is essential government policy.

This series is intended to help insure you are aware of the key sales tax facts for YOUR state, so let’s take this opportunity to lake at some other California Sales Tax Facts.

California Sales Tax Facts :

  • All business owners must register their business in California. Sales tax is charged on sales and leasing of tangible personal property; this includes wholesale sales.
  • On July 1, 2017 the California Department of Tax and Fee Administration became the website for electronic filing of California Sales and Use Tax. At present some Sales and Use tax administration still occurs within the jurisdiction of the California State Board of Equalization until such time as all activities related to sales and use tax have been fully migrated to the CDTFA.
  • In California, retail sales of tangible items are generally subject to sales tax. Examples include furniture, giftware, toys, antiques and clothing. Some labor service and associated costs are subject to sales tax if they are involved in the creation or manufacturing of new personal property.
  • Some items are exempt from sales and use tax, including sales of certain food products for human consumption (many groceries), sales of prescription medicine and certain medical devices and sales of items paid for with food stamps. Some sales are also nontaxable because the seller and/or purchaser meet certain criteria. A complete list is available in Sales and Use Tax: Exemptions and Exclusions.
  • In some cases, retailers must report use tax rather than sales tax. The most common example of a purchase subject to the use tax is a purchase of an item for use in California from an out-of-state retailer. Out-of-state retailers who are engaged in business in California are required to collect the use tax, whenever applicable, from the consumer, at the time of the sale.
  • California is still NOT a member of Streamlined Sales Tax (SST).
  • California posts the top 500 sales tax delinquents on their website to shame them into compliance.
  • California has a sales tax rate of 7.25%. This rate is made up of a base rate of 6%, plus a mandatory local rate of 1.25%. With the addition of locally approved county and municipal taxes, the total combined sales tax rate can be as high as 10.25%, the highest in the United States.
  • Effective April 1, 2018 the following City sales tax rates will change:
  1. Burlingame (San Mateo County), from 8.75% to 9%
  2. Farmersville (Tulare County), from 8.25% to 8.75%
  3. Hawthorne (Los Angeles County), from 9.5% to 10.25%
  4. La Mirada (Los Angeles County), 10.25% to 9.5%
  5. Larkspur (Marin County), from 8.75% to 9%
  6. Nevada City (Nevada County), from 8.75% to 8.375%
  7. Palm Springs (Riverside County), from 8.75% to 9.25%
  8. Santa Barbara (Santa Barbara County), from 7.75% to 8.75%
  9. Vacaville (Solano County), 7.625% to 8.125%
  10. Woodlake (Tulare County), 7.75% to 8.75%
  11. In addition, the rate in Mendocino County is increasing by 0.5% which impacts Unincorporated Mendocino County, Fort Bragg, Point Arena, Ukiah and Willits.

It can be deceivingly easy to be lured into a false sense of compliance when it comes to sales tax; there can be a tremendous variance in the tax rate, and taxability of things, just right across the street as either the city, county or both might change. With the changing tax regulations split by so many jurisdictions, trying to remain compliant makes you prone to error and consumes valuable hours of your time in collection, accounting and reporting for what is pass-through paperwork rather than revenue-generating activities.

Avalara provides solutions for sales tax automation, including tax calculation, exemption certificate management, returns processing and 1099 filing and reporting. Automation via Avatax gives you the assurance of compliance without sacrificing productivity so that your sales tax is way less taxing than ever before.