Introduction
California voters approved the first sales tax in 1933. Sales taxation, collection, and allocation have undergone several transformations along a winding journey of exemptions and evolving state and local bureaucracy. Today, the statewide sales tax rate on eligible taxable goods is 7.25%, but there is considerable variation across the state.
Sales tax is administered and distributed by the state, but the 7.25% sales tax rate is composed of both state and local levies. As the chart on the following page illustrates, sales tax revenue helps fund a broad variety of county services ranging from anti-poverty programs, behavioral health services, and communicable disease control to regional parks, veterans’ services, and weights and measures, with a litany of prog rams and services in the middle.
If the statewide sales tax rate is 7.25%,
why does the tax rate vary across the
state?
Under California law, cities and counties are
authorized to impose local transaction and use tax
rates, when approved by the local jurisdictions’
voters. Transaction and use taxes are “added on”
and administered in tandem with the sales and use
tax. For ex ample, voters in Sacramento County
approved a 0.5% transaction and use tax (Measure
A, 2004), increasing the countywide tax rate to 7.75%
for taxable transactions. The state often refers to
these taxes as “district taxes.” Across California’s 58 counties, the unweighted average sales tax rate is
7.75%. When weighted for population, the average
sales tax rate across California’s 58 counties is 8.41%.
Bradley-Burns Uniform Local Sales
and Use Tax Act (“Bradley-Burns”)
The Bradley -Burns Act allows local governments to
adopt local sales and use tax rates up to 1% of
taxable sales in their jurisdictions. Today, all cities and counties in California impose a Bradley -Burns tax,
accounting for 1% of the statewide sales tax rate of
7.25%. The Bradley -Burns tax is a general tax,
meaning its uses are unrestricted and can be used
for general government purposes. Proposition 1A
(2004) prohibits the Legislature from reducing the
local sales tax rate or changing the method of
allocation of local sales tax revenues.
What is the “use” part of the sales and
use tax?
California’s use tax complements the sales tax. In
cases where the sales tax is not collected, the use
tax is imposed at the same rate as the sales tax. The
use tax is most commonly applied to goods
purchased out -of-state, long -term lease payments,
private vehicle transactions, and construction
contractors. The use tax is also applied when it is
impractical to identify the multiple jurisdictions where the seller operates.
Sales and Use Tax Exemptions
Although the overall sales tax rate ( 7.25%) is higher
than most states, California has one of the smallest
pools of taxable goods. Virtually all services are
exempt from the sales and use tax in California.
Services commonly taxed in other states, but not in
California, include dry cleaning, automobile or
appliance repair, extermination services, lawn care,
swimming pool cleaning, and digital downloads. The
sales tax also does not apply to the sale of real
property, such as land and buildings. The state
continues to narrow the base of goods th at are
taxed with additional exemptions. For example, the
sales tax is not applied to most groceries, utilities,
museums, public art, manufactured housing, and
more.
California State Association of Counties®
Issue Brief: California Sales and Use Tax
For an electronic version of this Issue Brief, visit
https://www.counties.org/legislative-resource-
library or scan the following QR Code.
ATTACHMENT C
Statewide Sales and Use Tax Rate, Purpose, and Allocation
State General Fund Revenue Rate: The
statewide general-purpose sales tax.
Local Revenue Fund (1991 Realignment): In
1991, the state realigned various health and
welfare program responsibilities to counties.
This shift included dedicating 0.5% of the
state-imposed sales and use tax rate to
counties for these programs.
Local Public Safety Fund (Proposition 172,
1993): Proposition 172 established a 0.5%
state sales tax to fund public safety
programs (e.g., sheriff, police, fire, district
attorney, etc.) to mitigate the impacts on
those programs of state shifts of property tax
revenues.
Local Revenue Fund (2011 Realignment): In
2011, the state realigned various corrections
and rehabilitation and health and welfare
program responsibilities to counties. This shift
included dedicating 1.0625% of the state-
imposed sales and use tax rate to counties
for these programs.
County Transportation Fund: The
Transportation Development Act (1971)
added a 0.25% rate for countywide transit
and other transportation purposes.
1% Bradley-Burns Uniform Local Sales and
Use Tax: The local 1% rate is a general tax
with unrestricted uses by local governments.
Optional Local Taxes for Local Programs:
Voter approved optional taxes may be
levied as general or special taxes.
Resources:
• “California City and County Sales and Use Tax Rates” California Department of Tax and Fee Administration: https://www.cdtfa.ca.gov/taxes-and-fees/rates.aspx • “Sales and Use Taxes: Exemptions and Exclusions” California Department of Tax and Fee Administration: https://www.cdtfa.ca.gov/formspubs/pub61.pdf • “Understanding California’s Sales Tax” Legislative Analyst’s Office, May 6, 2015:
https://lao.ca.gov/Publications/Detail/3244
3.9375%
State General
Fund
Revenue Rate
0.5%
Local Public
Safety Fund
(Proposition
172, 1993)
0.5%
Local
Revenue
Fund (1991
Realignment)
1.0625%
Local
Revenue Fund
(2011
Realignment)
0.25%
County
Transportation
Fund
1.0%
Bradley-Burns
Uniform Local
Sales and
Use Tax
0 to 3.5%
Optional local
taxes for local
programs
7.25% - 10.75%
Total State and Local
Base Sales and Use Tax
www.counties.org (916) 327-7500 @CSAC_Counties
ATTACHMENT C