At Paragon Accountants, we often get asked questions regarding sales tax with buying and selling goods, especially online. We’ve answered some of the most common concerns here to help keep you sales tax savvy.
When is sales tax applicable?
In California, retail sales and “tangible personal property” (furniture, tools, vehicles, etc.) are subject to sales tax. California residents are taxed on all income, within and outside the United States. Easy enough right?
As a seller, you are required to pay the sales tax you collect to the Board of Equalization. How do you go about do this? You’ll have to get a license from your state. Here’s a link to apply for a reseller license: click here.
How does sales tax apply to buying and selling goods online?
This will vary from state to state. Typically, if an online seller maintains a physical presence in a state that charges sales tax, then they must charge a sales tax on the items sold within that state. If the retailer is selling an item to a customer outside of the state they’re in, they are not required to collect sales tax. California sales tax rates only apply to customers in the state of California. For example, if you are selling items online to a customer in California and you are in Los Angeles, you must collect sales tax.
California residents that purchase tangible property that will be used, consumed, or stored in California are required to pay tax. State law requires tax on in-state purchases as well as out-of-state purchases for use in California. If you are purchasing tax-free items from an out-of-state retailer, you are required to report your purchases to the tax agency. This is known as a “use tax”.
What are the sales tax rates in California?
Statewide, the California sales and use tax is 7.5%, but the rate varies state wide. Here is a link to look up the California city and county sales and use tax rates by address. These results are effective as of October first of this year.
How do I know how much to charge?
For customers in your district, you can add together the sales tax rate and the distract tax rate. This will give you the rate you’re responsible for collecting on each sale. For customers outside of your district, you can just collect the state rate only.
Still have more questions? Paragon is here for you! Give us a call anytime and let us get you on the right track.
