California Consumer Tax Laws
Last updated 11/18/2019
There are two basic types of consumer tax laws: those intended to raise revenue for the state, and those meant to discourage certain behaviors. California consumer tax laws include both types -- including sales tax that affects everyone in the state and relatively excessive cigarette taxes. Liquor and gasoline taxes also are relatively high, in an attempt to limit their consumption as well as raise revenue.
California's consumer tax laws are listed in the table below, with some additional information below. See State Tax Laws for more general information, and check with your local municipality for county and city taxes.
|Sales Tax||6.5% Rev. & Tax §§6051 to 6051.4 (total sales tax rate may be as high as 10%, depending on the municipality); Online retailers with no physical presence in the state also have to collect sales taxes, provided they generate more than $100,000 of gross sales or services and engage in at least 200 transactions in the state annually.
|Cigarette Tax||$0.0435 per cigarette plus 87¢/pack of 20 Rev. & Tax §§30101, 30123|
|Gasoline Tax per Gallon||18¢ Rev. & Tax §7351|
|Use Tax||7.5% Rev. & Tax §§6201 to 6201.4|
|Liquor Tax||Beer $0.20/gal.; Still wines $0.20/gal.; Sparkling wine $0.30/gal.; Spirits $3.30 to $6.60/gal. Rev. & Tax §§32151, 32201, 32220|
Purposes for Consumer Taxes
One of the most obvious justifications for a tax is raising revenue for the state, county, or city where the tax is charged. Often, the tax received for certain goods is used for causes related to that product. As an example, taxes on gasoline are often used to pay for roads and other infrastructure repair. People who drive electric cars, or other cars that do not use gasoline, may have to pay a yearly tax on their vehicle, based on mileage, to help pay for road repairs and maintenance because they do not pay the gasoline tax.
Some taxes are levied on goods to discourage their use. For example, in California, cigarettes have a $0.0435 tax per cigarette and a $0.87 tax on a pack of 20 cigarettes. Rather than raising revenue, these taxes increase the cost of cigarettes in the hope that people will not purchase them due to expense. In some states, like New York, cigarettes can cost up to $14.50 per pack because the excise tax is so high.
Sales Tax vs Excise Taxes
Excise tax is a tax on a specific item, like gasoline tax, tobacco tax, and alcohol tax. Sales Tax is a tax on the total sale price of an item. These taxes can get very high for expensive items, like cars. Even if a car is purchased from a private seller, the buyer will likely have to pay sales tax when they first register the car, based on the purchase price. Also, some states and municipalities require charging a tax based on the retail value of an item, rather than its final sale price after rebates. Some cell phone companies will give away free cell phones when you sign a contract, but you may be required to pay sales tax on that phone if a company or manufacturer's rebate covers the cost of the phone.
Taxing Out of State Goods
Generally, a state cannot tax goods that are purchased in another state, or imported from that state. This rule goes back to the Constitution, which only gives the federal government the power to regulate commerce between two states. However, this does not mean that you will always avoid taxes by purchasing expensive items in a state without sales tax, like Oregon. If you purchase a car out of state, you may have to pay a use tax on that item for using it within California. This helps to discourage Californian's from spending their money outside of California.
Taxing Goods Purchased on the Internet
If you make purchases online, you may or may not have to pay sales tax on them. The general rule is that if a business has a physical presence in the state where the item is purchased, the seller must collect sales tax from the buyer. If the seller does not have a physical presence in the buyer's state, the seller does not have to collect sales tax unless the seller spent more than $100,000 in sales or has engaged in at least 200 transactions in the state.. The rules for international online purchases differ greatly.
If you would like to know more about consumer taxes, there are many tax attorneys throughout California who may be able to help.
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