Guide to sales tax returns in California

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  1. Introduction
  2. How to find your California return due date
    1. California sales tax prepayments
  3. How to prepare your California sales tax return
    1. Sales transactions
    2. Special taxing jurisdictions
    3. Other required information
  4. How to complete and file a California sales tax return

California has some of the most complex sales tax laws in the US. It's one of the few states that has implemented hybrid-sourced sales tax rules – with origin-based county and state sales taxes, but destination-based district sales taxes.

These complexities can make filing a timely, accurate sales tax return a significant challenge. To file a sales tax return in California correctly, businesses must first identify their filing frequency and due dates, then prepare the return and finally, file and remit sales tax.

What's in this article?

  • How to find your California return due date
  • How to prepare your California sales tax return
  • How to complete and file a California sales tax return

How to find your California return due date

The timing for filing your return depends on your average monthly sales tax liability. While most businesses will file a California sales tax return quarterly, businesses with an average monthly sales tax liability of $100 or less can file annually. Once you've registered for a California sales tax permit, the state will assign you a filing frequency. You'll find the latest filing due dates on the California Department of Tax and Fee Administration (CDTFA) website.

Any business with a valid California sales tax permit must file a sales tax return on every due date, even if it has no sales tax to report. In that scenario, the business will complete a sales tax return, but not submit any payment.

California sales tax prepayments

Some businesses will file quarterly California sales tax returns, but are required to make monthly prepayments. According to Section 6471 of the California Sales and Use Tax Law, any business with an average monthly sales tax liability of $17,000 or more has to make prepayments.

In this scenario, instead of paying your sales tax liability at the time that you file your return, you'll make a payment each month during the quarter before you file that quarterly return. Prepayments are due on or before the 24th day of the following month. In other words, your January prepayment would be due on or before 24 February, your February prepayment would be due on or before 24 March and you'd make your March payment when you file your first-quarter sales tax return at the end of April.

Each monthly prepayment has to be at least 90% of the tax liability due for that month.
However, the rules for second-quarter prepayments are different. The initial prepayment, for the month of April, follows the usual guidelines of 90%. But the second prepayment, for the month of May, is actually considered to be a prepayment for 1 May to 15 June. As a result, it must equal one of the following amounts:

  • 90% of the tax liability for May plus 90% of the tax liability for the first half of June
  • 90% of the tax liability for May plus 50% of the 90% tax liability for May as well

How to prepare your California sales tax return

Before you can start working on the sales tax return, you'll need to collect the sales information for your tax period. The CDTFA online tax return system will tell you what details you need, but filing a return generally requires the following information:

Sales transactions

Every business will need to know two things to complete its California sales tax return: how much it sold – both in gross sales and in taxable sales – and to whom the business sold it.

You are also required to collect and pay sales tax for any personal property sold to residents of California, with certain exceptions. An example of an exception would be if the buyer has a resale certificate, or if the item isn't considered taxable in California.

You'll also report your gross California sales. This is your total sales revenue from buyers located in California, regardless of whether those sales were taxable.

In addition to your gross sales, filing a sales tax return requires the following sales transaction information:

  • Taxable sales by type: Different types of products are subject to different tax rules and amounts, so you'll need to know how your total taxable sales break down.
  • Non-taxable sales by type: Examples of non-taxable sales include sales to resellers, non-taxable labour and non-taxable foods.
  • Deductions: This might include items, such as delivery charges.
  • Total collected sales tax: This is the total amount of sales tax that you collected from customers during the filing period.

If the amount of taxable sales does not reach economic nexus thresholds in California, then a sales tax return might not be required. In addition to meeting economic nexus thresholds, if a business has employees, an office or a warehouse located in California and is selling taxable goods and/or services – the business must collect sales taxes on all taxable transactions, file returns and pay the appropriate amount to the state. If no sales were made during a filing period, the business must still file a return for $0.

Special taxing jurisdictions

In addition to paying state sales taxes, California sellers must manage district sales taxes as well. Whenever you make a sale to a buyer located in a town/city that charges more than the base state tax rate, you must collect the extra taxes for that district. For example, buyers in Los Angeles are subject to a 2.25% district tax in addition to the 7.25% California state tax. Whenever you make a sale to a Los Angeles resident, you would charge a total of 9.5% in sales taxes.

There are hundreds of sales tax districts in California, which is why preparing a California sales tax return can be daunting. For more information about how district taxes work, see Publication 44.

Other required information

Some businesses will be required to provide more information to complete their sales tax returns. For example, out-of-state businesses will need a list of all sales by county in order to complete Schedule B. Additionally, if you made monthly prepayments, you'll need those amounts ready, so you know how much remains to be paid for the quarter at the time that you file the return.

All businesses operating within the state of California are required to fill in Schedule C, which lists the addresses of all of your places of business for which seller's permits have been issued. The taxable amount sold in each location must be listed.

How to complete and file a California sales tax return

The final step to completing a sales tax return in California is to file and remit tax. The CDTFA has an online filing system that will help you enter your information to generate the return.

Once you've completed the return, you'll then need to remit the total calculated sales taxes minus any monthly prepayments that you've already made. You can pay electronically through the CDTFA website.

The content in this article is for general information and education purposes only and should not be construed as legal or tax advice. Stripe does not warrant or guarantee the accurateness, completeness, adequacy, or currency of the information in the article. You should seek the advice of a competent attorney or accountant licensed to practice in your jurisdiction for advice on your particular situation.

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