Sales Tax Transactions

Generally, unless exempt or excluded from tax, your retail sale is subject to state and local sales tax if you have a place of business in California that participates in the sale and title to the goods passes to your customer within this state. If either of these conditions are not met, the applicable tax is use tax. Most local sales tax will go directly to the local jurisdiction where the sale occurred.

When a sale cannot be identified with a permanent place of business in this state, the sale will be allocated to the local jurisdictions through a countywide pool. For example, certain sellers, such as auctioneers, construction contractors making sales of fixtures, catering trucks, or other permit holders who operate in more than one location will allocate their sales through a countywide or statewide pool.

Use Tax Transactions

When sales tax does not apply, state and local use tax generally apply to the sales price of tangible personal property that was purchased from a retailer and stored, used, or otherwise consumed within the state. Local use tax is generally allocated to local jurisdictions through a countywide pool. Each local jurisdiction within a county, including the county itself, receives a prorated amount of the countywide pool (based on its proportion of the local tax that is directly allocated to jurisdictions within the county).

Place of Sale vs. Place of Use

Local sales tax transactions are generally allocated to the jurisdiction where the place of sale is located while use tax transactions are allocated to the jurisdiction where the property is first functionally used. The ship-to-address is presumed to be the place of first functional use. Therefore, when the transaction is subject to use tax you will generally allocate the local use tax to the jurisdiction into which the property was shipped through the countywide pool of the county in which that jurisdiction is located.

California Retailers with One Location

If you are a retailer with only one place of business in California and that place of business participates in the sale, then the local sales tax will be allocated to the jurisdiction in which the place of business is located.

California Retailers with Multiple Locations

When you are a retailer with multiple locations in California, you must allocate your sales properly so that the local sales tax goes to the correct local jurisdiction. If you have more than one place of business in California and only one place of business participates in the sale, your sale will be allocated to the jurisdiction where that place of business is located. However, if you have more than one place of business that participates in the sale, your sale will be allocated to the local jurisdiction where the principal negotiations are carried out.

As an online retailer, you are required to pay applicable sales and/or use tax and allocate your sales like other retailers, but how you report and allocate your internet transactions can depend on a number of factors. For more information, see the Online Retailers: Registration and Local Tax section of this guide.

If you are an out-of-state retailer, you are engaged in business in California if, for example:

• You maintain, occupy, or use, directly or indirectly, or through a subsidiary or agent, a permanent or temporary office, place of distribution, sales or sample room, warehouse or storage place, or other physical place of business in California.
• You have representatives, agents, or independent contractors operating in California on your behalf or under your authority, or under the authority of your subsidiary, for purposes of making sales, taking orders, assembling or installing merchandise, training customers, making deliveries, or otherwise establishing or maintaining a market for your products.
• You receive rental payments from the leases of tangible personal property located in California, such as leases of machinery, equipment, and furniture.
• You own or lease real property or personal property such as machinery or equipment, furniture, or computer servers located in California.
• Beginning April 1, 2019, you have total combined sales of tangible personal property for delivery in California by you and all persons related to you exceeding $500,000 during the preceding or current calendar year.

As stated above, on and after April 1, 2019, you are considered engaged in business in California if, in the preceding or current calendar year, you have total combined sales of tangible personal property for delivery in California by you and all persons related to you exceeding $500,000. Please see our online tax guide, Use Tax Collection Requirements Based on Sales into California Due to the Wayfair Decision, for more information.

If you are an out-of-state retailer that is not engaged in business in California, you may voluntarily register your business and collect, report, and pay use tax for your customers in this state.

For more information on out-of-state retailers and what it means to be “engaged in business” in California, see our Tax Guide for Out-of-State Retailers.

Below are common situations you may encounter, along with information about the proper way to allocate your sales.

Stock of Goods (Inventory) in California

As an out-of-state retailer engaged in business in California, you may be shipping property from a dedicated, non-commingled stock of goods (inventory) in a third-party fulfillment center or warehouse located in California. This stock of goods is considered a place of business. When you or the third-party fulfillment center makes shipments from this location to a California customer and title to the property passes to the customer in California, the transaction is subject to sales tax, and the sales transaction will be allocated to the jurisdiction where the stock of goods is located, if no other location of yours participates in the sale.

For more information about Internet retailers that utilize a fulfillment center, please see our online guide, Fulfillment Centers.

Sales Negotiated and Shipped from Outside California

When you negotiate sales and ship property from outside California and title to the property passes to the purchaser outside of California, the transaction is subject to use tax and local use tax is allocated to the jurisdiction where the property is shipped, through the countywide pool.

Sales Negotiated in California and Shipped from Out-of-State Stock of Goods (Inventory)

If you negotiate sales at your registered place of business in California and property is shipped from inventory located outside California, the transactions are subject to use tax if title passes to the purchaser outside California (for example, the shipping terms are freight on board [FOB] shipping point). Local use tax is allocated to the jurisdiction where the property is shipped through the countywide pool.

Sales or Purchases of $500,000 or More Subject to Use Tax

Generally, if you are an out-of-state retailer engaged in business in California and make a sale to a California consumer of $500,000 or more, you must collect the use tax and report and pay it directly to the local jurisdiction in which the first functional use of the property occurs rather than through the countywide pool. This applies to use tax only and not to sales tax transactions.

People who self-report or retailers who purchase tangible personal property of $500,000 or more per transaction from sellers who are not required to collect the tax must report the local use tax to the jurisdiction where the property is first functionally used.

Holders of a Use Tax Direct Payment Permit may issue a use tax direct payment exemption certificate to any registered retailer or seller from whom they make purchases that are subject to use tax. Subsequently, holders must self-assess and report the use tax due on the purchase(s) for which the certificate was issued. Use tax transactions will be allocated directly to the local jurisdiction in which the first functional use of the tangible personal property occurs, rather than through the countywide pooling process.

Materials

Generally, construction contractors are considered the consumer of materials furnished and installed during the performance of a construction contract. The place of use of the materials is the jobsite. Although less common, if a construction contractor is regarded as the retailer of materials and has a valid seller's permit, sales for materials installed and furnished at the jobsite will be allocated through the countywide pool of the county where the jobsite is located.

Purchase of Commingled Materials

A construction contractor that purchases a commingled lot of materials (that is, a portion of which it will consume and a portion of which it will sell at retail) may only issue a resale certificate when they intend to resell a significant portion of the materials and, at the time of purchase, they do not know which items will be consumed and which will be resold. However, a contractor may not issue a resale certificate with respect to the entire lot of materials if, at the time of purchase, the contractor knows that certain materials will be consumed in the performance of a construction contract.

(If the contractor has paid sales tax on materials that they end up selling at retail, then the contractor may claim a tax-paid purchases resold deduction on their sales and use tax returns to offset the sales tax reimbursement previously paid to their vendor.)

Materials Purchased for Resale and Consumed

When a construction contractor properly purchases materials using a resale certificate but removes the materials from their resale inventory and consumes them during the performance of a construction contract, they owe use tax measured by the purchase price of the materials. They will report the purchase price of the materials on line 2 of their sales and use tax return and allocate the use tax through the countywide pool of the county where the jobsite is located.

A contractor improperly purchases materials using a resale certificate when, for instance, they purchase certain materials they intend to consume or purchase a lot of materials of which they do not intend to resell a significant portion. If the sale to the contractor was subject to sales tax, the contractor must report the sales tax on their sales and use tax return for the period in which the property was purchased and allocate the local tax to the jurisdiction where the sale occurred.

Fixtures

When you make retail sales of fixtures pursuant to a construction contract, you are required to hold a valid seller's permit. The place of sale is the jobsite. Since the jobsite is usually not a registered place of business, as a construction contractor you will allocate sales of fixtures through the countywide pool of the county where the jobsite is located.

Machinery and Equipment

Sales of machinery and equipment, subject to sales tax that are sold pursuant to a construction contract should be allocated to your permanent place of business where the principal negotiations of the contract take place. If you are an out-of-state construction contractor making a sale of machinery and equipment to a California customer subject to use tax, you should allocate your sales through the countywide pool to the jurisdiction of use.

Construction Contracts over $5,000,000

A construction contractor who enters into a construction contract equal to or greater than $5,000,000 may elect to obtain a sub-permit for the jobsite of the qualifying contract enabling the contractor to make a direct allocation of tax to the local jurisdiction in which the jobsite is located rather than through the countywide pool. The qualifying contract price applies to each contract or subcontract for work performed at the jobsite, not the total value of the prime contract.

For more information about construction contracts, please see publication 9, Construction and Building Contractors.

Generally, the tax on leases of tangible personal property is use tax. Use tax on rental receipts should be allocated through the countywide pool of the county where the leased property is used.

If you are a lessor with a single permanent place of business and make short-term leases of tangible personal property, the place of use is the local jurisdiction where your business is located. You will allocate sales for your leases directly to your business location.

For information about leases, see publication 46, Leasing Tangible Personal Property.

Note: Mobile transportation equipment (MTE) includes rail cars, locomotives, truck tractors and trailers, ships, reusable shipping containers, and airplanes. The law considers lessors of MTE to be consumers of the equipment. Therefore, unless a timely election to pay tax on rental receipts is made, tax is due on the purchase price of the MTE. For a complete listing of MTE, please see Regulation 1661, Leases of Mobile Transportation Equipment.

The following chart provides general local tax allocation guidelines for motor vehicle leases (excluding one-way rental trucks):

1. Motor Vehicle means any (new or used) self-propelled passenger vehicle (other than a house car) or pickup truck rated less than one ton.
2. Leasing company means a motor vehicle dealer/lessor that originates lease contracts and does not sell or assign the lease contracts and that has annual motor vehicle lease receipts of $15 million or more annually for each business location.
3. Mobile transportation equipment (MTE) includes rail cars, locomotives, truck tractors and trailers, ships, reusable shipping containers, and airplanes. The law considers lessors of MTE to be consumers of the equipment. Therefore, unless a timely election to pay tax on rental receipts is made, tax is due on the purchase price of the MTE. For a complete listing of MTE, please see Regulation 1661, Leases of Mobile Transportation Equipment.

Common types of temporary seller's include sellers of:

• Fireworks
• Property sold at garage sales
• Christmas trees
• Property sold through Internet auctions
• Crafts
• Property sold at conventions, trade shows, swap meets, flea markets or other special events

As a temporary seller, the place of sale is the temporary location where the event takes place. You will allocate your sales directly to that local jurisdiction.

If you operate your catering business from a single retail location, you will allocate sales to that location. If you have multiple retail locations where sales are negotiated and catering orders are taken, sales will be allocated to the place where the principal negotiations take place.

If you are a caterer, our Tax Guide for Caterers may also be a helpful resource.

It may be hard to keep track of each location where sales are made. Therefore, itinerant merchants should allocate sales to the county in which their permanent address as shown on their seller's permit, is located (this may include a home address).

As a mobile food vendor, you are allowed to allocate sales through the countywide pool.

For more information about Mobile Food Vendors, see our Mobile Food Vendors tax guide.

If you are an auctioneer making retail sales in California, the place of sale is the place where the auction is held. If the auction is held at a location other than your registered place of business, you will allocate sales following these guidelines:

• Taxable auction sales totaling $500,000 or more per event: you will allocate sales directly to the local jurisdiction where the auction occurs.
• Taxable auction sales totaling less than $500,000 per event: you will allocate sales to the local jurisdictions within the county where the auction occurs through the countywide pool. Each local jurisdiction will receive a prorated amount of the local sales tax.

The following resources contain additional local tax information you may find helpful:

• Regulation 1610, Vehicles, Vessels, and Aircraft
• Publication 52, Vehicles and Vessels: Use Tax
• Publication 44, District Taxes (Sales and Use Taxes)
• Publication 105, District Taxes and Sales Delivered in California
• Publication 34, Motor Vehicle Dealers

For sales and use tax purposes, the sale of jet fuel is considered consummated at the point of the delivery of that jet fuel to the aircraft. For more information about sales of jet fuel, see our webpage, Aircraft Jet Fuel.

The schedule you use depends upon the description you provide about your business activities. The most common schedules used are CDTFA-530-C, Schedule C – Detailed Allocation by Location of Sales and Use Tax Transactions, which is used to allocate sales directly to a local jurisdiction, and CDTFA-531-B, Schedule B-Detailed Allocation by County of Sales and Use Tax Transactions, which is used to allocate sales for certain sellers through the countywide pool. Below you will find information about Schedules C and B, along with additional schedules used to allocate local tax. Sometimes you may need to use a combination of schedules to allocate your local tax.

Schedule C – Detailed Allocation by Location of Sales and Use Tax Transactions

This schedule is used to allocate sales among cities, towns, unincorporated areas, or counties (or occasionally a combination thereof) in which you have business locations or sub-outlets. Schedule C allows you to allocate sales to your place(s) of business or multiple business locations.

Schedule B – Detailed Allocation by County of Sales and Use Tax Transactions

The following businesses generally allocate sales through the countywide pool:

• Certain auctioneers (taxable auction sales totaling less than $500,000 per event)
• Certain out-of-state retailers who have been authorized by CDTFA to operate under section 6015
• Section 6015 retailers may include a business that uses salespersons, representatives, peddlers, canvassers, agents, or other persons who operate under the direction of or obtain property from the business located outside California.
• Vending machine operators
• Out-of-state sellers engaged in business in California
• Out-of-state sellers not engaged in business in California
• Construction contractors who:
  • Purchase materials without tax from an out-of-state vendor and are the consumer of materials used in the performance of a construction contract, or
  • Purchase materials under a resale certificate because they are a retailer of materials and also withdrawal materials from resale inventory (consumable materials and materials purchased for resale are commingled) in the performance of a construct contract, or
  • Make retail sales of fixtures during the performance of a construction contract.
• People making ex-tax purchases for use at locations where a seller's permit is not required
• Mobile truck vendors
• Itinerant merchants – retailers with no permanent place of business should allocate sales to the permanent business location as shown on their seller's permit (this may include permanent location as shown on their seller's permit (this may include a home address).
• Itinerant veteran vendors – itinerant veteran vendors are considered the consumer of property owned and sold. They are allowed to allocate local use tax on Schedule B. However, itinerant veteran vendors making sales of alcoholic beverages or items sold for more than $100 are considered a retailer and must allocate local sales tax directly to a local jurisdiction using Schedule C.

Additional Schedules

Additional schedules are listed below. Instructions are found on the back of each form.

CDTFA-531-F, Schedule F – Detailed Allocation by City of Taxable Transactions for Lessors of Motor Vehicles:

CDTFA-531-F is used by lessors of motor vehicles to allocate local tax due on certain leases to the local jurisdiction of the new motor vehicle dealer from whom the lessor acquired the leased vehicle.

CDTFA-531-H, Schedule H – Detailed Allocation by City of Taxable Sales and Use Tax Transactions of $500,000 or More:

CDTFA 531-H is used by various industries, such as auctioneers with sales over $500,000 or people making sales or purchases over $500,000, to allocate the local sales and use tax to the proper jurisdiction.

CDTFA-531-X, Schedule X – Partial Exemption from Bradley – Burns Local Taxes California Department of Aircraft Common Carrier:

CDTFA-531- X is used to allocate the partial exemption credit for sales to or purchases for use by aircraft common carriers, as described in Regulation 1805.

CDTFA 531-P, Schedule P – Tax Paid to Other State(s):

CDTFA-531-P is used to calculate the credit for the tax paid to other state(s). The credit offsets the tax due for the corresponding state, county, local, and special taxing jurisdictions where the purchase was consumed. Each purchase claiming this credit must be entered separately on this schedule.

CDTFA 531-Q, Schedule Q – Tax Recovery:

CDTFA-531-Q is used to claim a tax recovery for prior period(s). Amounts claimed on CDTFA-531-Q may only consist of tax recovery items where the original taxable sale was in a prior period and the tax recovery is in the current period. If you have tax recovery items that should have been claimed in a prior period, you will need to amend the prior period return or file a claim for refund for those transactions rather than claiming them in the current period.

Additional information is available on our Tax Guide for Local Jurisdictions and Districts webpage. Procedures for jurisdictions to review CDTFA records and CDTFA review of local and district tax reallocation petitions are available in the Compliance Policy and Procedures Manual Chapter 9, Miscellaneous.

Under Regulation 1699, Permits, subdivision (a), a person that is actively engaged in selling tangible personal property in this state of a kind the gross receipts from the retail sale of which are required to be included in the measure of the sales tax is required to register for a seller's permit for each place of business in California at which the person customarily negotiates transactions relating to sales with customers. In general, permits are not required for a seller's warehouse or other places where merchandise is merely stored (that is, storage locations) if they are maintained in conjunction with a place of business for which a seller's permit is held and customers do not customarily visit the storage location to make purchases. However:

• At least one permit must be held by every person that maintains stocks of merchandise for sale at a storage location in this state; and
• Seller's permits are required for storage locations from which retail sales negotiated out of state are delivered or fulfilled.

Retailers selling tangible personal property for storage, use, or other consumption in this state that are not required to hold a seller's permit but that are a “retailer engaged in business in this state” as defined in Revenue and Taxation Code (R&TC) section 6203, subdivision (c), are generally required to register for a Certificate of Registration – Use Tax (R&TC section 6226; Regulation 1684, Payment and Collection of Use Tax, subdivision (a)). A retailer is engaged in business in this state if it has a sufficient physical presence, examples of which include, but are not limited to, maintaining a place of business in this state, having an agent, representative or salesperson under the retailer's authority for purposes of selling, delivering, or installing tangible personal property in this state, or owning or leasing real or personal property located in this state.

Additionally, as of April 1, 2019, a retailer is engaged in business in this state if, in the preceding or current calendar year, the total combined sales of tangible personal property for delivery in California by the retailer and by all people related to the retailer exceeds $500,000.

The general registration requirements discussed in the General Registration Requirements heading above apply to all retailers. However, there are additional rules for marketplace facilitators and marketplace sellers, as defined in R&TC section 6041. Beginning October 1, 2019, a marketplace facilitator that is registered or required to be registered for a seller's permit or Certificate of Registration – Use Tax is the retailer for sales and use tax purposes with respect to all the retail sales it facilitates on behalf of marketplace sellers through its marketplace (marketplace sales) (R&TC section 6043), unless R&TC section 6047, subdivision (a) applies.

A marketplace facilitator must consider both its own sales and the sales it facilitates for marketplace sellers in determining whether it is required to register for a seller's permit or Certificate of Registration – Use Tax (R&TC section 6042). A marketplace facilitator must include sales it facilitates on behalf of marketplace sellers through its marketplace in addition to any sales made on its own behalf when determining if it is a retailer engaged in business in this state based on the $500,000 sales threshold (R&TC section 6044, subdivision (a)).

A marketplace seller, whether located inside or outside California, is not required to register for a seller's permit or Certificate of Registration – Use Tax if all of its sales in this state or for use in this state are marketplace sales. However, a marketplace seller may be required to register if it also makes direct sales, such as sales made through its own website or sales facilitated by unregistered marketplace facilitators (R&TC section 6045). Also, even though a marketplace seller is not the seller or retailer with respect to its marketplace sales, it still must include its marketplace sales, along with its direct sales, when determining if it is a retailer engaged in business in this state based on the $500,000 threshold (R&TC section 6044, subdivision (b)).

Generally, sales tax applies if an in-state place of business of the retailer, such as a local office, branch, outlet, or other place of business, participates in the sale and the sale occurs in this state (see Regulation 1620, Interstate and Foreign Commerce, subdivision (a)). This section primarily relates to in-state participation, but if either of these conditions are not met, sales tax does not apply. When sales tax does not apply, use tax applies to the use of property that was purchased from a retailer for use in this state.

The participation required by Regulation 1620 must be by a place of business of the retailer. A place of business of the retailer includes any location that comes within the description in R&TC section 6203, subdivision (c)(1), which refers to “an office, place of distribution, sales or sample room or place, warehouse or storage place, or other place of business” in this state.

Generally, the location of a third party (a separate person as defined in R&TC section 6005) would not be a place of business of the retailer, even if the third party is a related entity. The presence of the retailer's employees at such a location would not, by itself, make it a place of business of the retailer. The presence of the retailer's property at a third-party storage location would also not generally make the storage location a place of business of the retailer. However, a third-party storage location can contain a place of business of the retailer if it contains dedicated storage of the retailer's property that is separate from other retailer's property (that is, non-commingled property, see Reynolds Memo Opinion [May 31, 2007]). Note, a storage location could contain places of business for multiple retailers for which it maintains dedicated storage of non-commingled inventory.

A marketplace sale is a sale facilitated through a marketplace facilitator and the retailer is the registered marketplace facilitator, not the marketplace seller. Therefore, a location of the marketplace seller is not a place of business of the retailer.

Regulation 1620, subdivision (a)(2)(A), states that participation in the transaction in any way by the in-state place of business is sufficient for the transaction to be subject to sales tax. However, to constitute participation, an activity must serve some real purpose and have some meaningful effect in the actual sales process and involve some genuine physical human interaction with the sale from that location.

Generally, activities taking place after the sale has occurred are not participation in the sale. There are also activities that a retailer might conduct from a California location to support its operations that do not constitute participation in the sale for purposes of Regulation 1620, subdivision (a)(2)(A), including price setting, purchase of resale inventory, web design, and general marketing.

Internet transactions are generally designed and intended to be processed online, without direct human intervention until the property is picked, packed, and shipped at the storage location. As such, a storage location is often the only place of business that participates in an Internet transaction. Activities related to creating and maintaining the automated online processes would generally be considered the type of support operations that do not constitute participation in any particular transaction. The location of the server where the website is hosted or maintained is also immaterial; see Annotation 710.0013.600, Internet Transactions.

Participation Examples

Note: These examples are based on specific facts and circumstances and do not address all scenarios. All of the cities in the examples are located in California.

Example 1

An online retailer has a corporate headquarters in City A where its employees solicit advertising, maintain accounting records, design and manage its webpage, and work on software programing, and where it maintains servers that process orders.

The activities performed at the headquarters indirectly support sales but are not sufficient to constitute participation in a specific sale. Therefore, the retailer's corporate headquarters does not participate in the transactions.

Example 2

A retailer maintains a separate, dedicated stock of goods at an in-state warehouse of its supplier. There are no employees of the retailer at this location. 15% of the retailer's California sales are fulfilled from the retailer's stock of goods and 85% are fulfilled from the other portions of the supplier's warehouse. The stock of goods constitutes a place of business of the retailer, which participates in the 15% of sales that are fulfilled from it. However, that place of business does not participate in the 85% of total sales that are fulfilled from the other portion of the supplier's warehouse.

Example 3

A retailer sells medical supplies pursuant to master contracts with hospitals. Sales are fulfilled from its in-state warehouse located in City A. The master contracts are negotiated by salespeople working out of an office located in City B. The locations in both City A and City B participate in the sales. However, the place of sale would be City B, where the principal negotiations occur.

Example 4

Office employees of a multi-location department store in City C download a spreadsheet of all California orders daily. The employees then organize columns on the spreadsheet to separate out sales that require fraud review. The employees conduct the fraud review for those sales, but often goods are already shipped before the review is completed. There is no participation in sales not subject to fraud review and there is also no participation in sales reviewed since the review is not actually necessary to complete the transaction.

Example 5

A retailer sells fixtures and supplies (cash registers, display racks, among others.) to a customer for use in its stores pursuant to a master contract. The customer's orders are completed online or over the phone with the retailer's out-of-state office, with delivery from both in-state and out-of-state warehouses. The employees at the retailer's in-state office in City H receive approval lists from the retailer's out-of-state office but have no contact with customers and do not do anything with the approval lists other than file them. The employees do not have any actual participation in the transaction. Therefore, these activities do not constitute participation.

When state sales tax applies to a transaction, the Bradley-Burns Uniform Local Tax (local) sales tax also applies, and if state use tax applies to a transaction, then local use tax also applies (Regulation 1803, Application of Tax).

Local sales tax is allocated to the jurisdiction where the sale occurs. If only one place of business of the retailer in this state participates in a sale, the sale occurs at that place of business. If more than one place of business of the retailer in this state participates in a sale, the sale occurs at the place of business where the principal negotiations are carried on (see Regulation 1802, Place of Sale and Use for Purposes of Bradley-Burns Uniform Local Sales and Use Taxes, subdivisions (a)(2)(B) and (d)). Local sales tax is usually allocated directly to the jurisdiction where the place of sale is located using Schedule C. However, if the retailer is not required to have a seller's permit for the place of business where the sale occurs, then the local sales tax is allocated to the countywide pool of the jurisdiction's county using Schedule B.

Local use tax is allocated to the jurisdiction where the property is first functionally used. (Regulation 1802, subdivision (d)). The location to which the property is shipped is generally presumed to be the place of first functional use. Local use tax is generally allocated on Schedule B to the countywide pool of the county in which the first functional use occurred.

1. Regulation 1802, Place of Sale and Use for Purposes of Bradley-Burns Uniform Local Sales and Use Taxes, subdivision (d), describes when local use tax is reported directly to the jurisdiction of use, but it would generally not apply to the type of Internet transactions discussed in this section.

The rules and information discussed in the sections above regarding the application of sales and use tax and the allocation of local tax apply to marketplace facilitators since they are the retailer with respect to marketplace sales. As such, for sales tax to apply, a place of business of the marketplace facilitator, not the marketplace seller, must participate in the marketplace sale. Likewise, the local sales tax is allocated based on participation in the marketplace sale by a place of business of the marketplace facilitator. In both instances, “participation” has the same meaning as it does for all other retailers.

A retailer is “engaged in business” in a district if, for example, the retailer:

• Owns or leases any real or tangible personal property, including, but not limited to, a computer server, in the district.
• Maintains, occupies, or uses, directly or indirectly, or through a subsidiary or agent, a permanent or temporary office, place of distribution, sales or sample room, warehouse or storage place, or other physical place of business in the district.
• Has a representative, agent, or independent contractor operating in the district on their behalf or under their authority, or under the authority of their subsidiary, for purpose of making sales, taking orders, assembling or installing merchandise, training customers, making deliveries, or otherwise establishing or maintaining a market for your products.
• Receives rental payments from the leases of tangible personal property located in the district, such as leases of machinery, equipment, and furniture.
• Sells or leases vehicles or undocumented vessels which will be registered in the district.
• Has total combined sales of tangible personal property in California, or for delivery in California by the retailer and all people related to the retailer, exceeding $500,000 in the preceding or current calendar year.

Assembly Bill 147 and Senate Bill 92 amended Revenue and Taxation Code (R&TC) section 7262 to provide that, on and after April 25, 2019, a retailer engaged in business in a district includes any retailer that, in the preceding or current calendar year, has total combined sales of tangible personal property in this state or for delivery in the state by the retailer and all people related to the retailer that exceed $500,000. A person is related to a retailer if they have a relationship with the retailer described in Internal Revenue Code section 267(b) and the related regulations.

Accordingly, beginning April 25, 2019, any retailer required to be registered with CDTFA, whether located inside or outside of California that meets the $500,000 threshold in R&TC 7262, is engaged in business in every district in the state whether or not they have a physical presence in those districts. As such, these retailers are required to collect the district use tax on taxable sales made for delivery in any district that imposes a district tax.

This means that if your sales of tangible personal property did not exceed the $500,000 threshold in the preceding calendar year, but your sales go over the threshold during the current calendar year, you are required to immediately begin collecting and paying the district use tax on all sales for delivery to California consumers. Your obligation to collect and pay all district use taxes will last, at least, through the end of the next calendar year.

Retailers that do not meet the $500,000 threshold are still engaged in business in any district(s) in which they have a physical presence. Please see our online tax guide, Use Tax Collection Requirements Based on Sales into California Due to the Wayfair Decision, for more information.

When you have a business located in California but do not meet the $500,000 threshold, you are required to report and pay district tax on your sales made in districts in which you are engaged in business. You are engaged in business in any district, for example, where you store inventory (such as a warehouse or fulfillment center in California) or in which you deliver merchandise to your customers using your own vehicle.

For more information on out-of-state retailers and what it means to be “engaged in business” in California, see our Tax Guide for Out-of-State Retailers.

Out-of-State Retailer Whose Presence is Limited to a Stock of Goods (Inventory) in California

You are an out-of-state retailer with no physical presence in California except for a stock of goods (inventory) located in a fulfillment center or warehouse. Because you have inventory stored in this state, you are engaged in business in California and must register the location(s) where your inventory is held with the California Department of Tax and Fee Administration. You are responsible for reporting and paying district tax on your taxable sales for delivery in a taxing district where you have a stock of goods.

(As noted above, on and after April 25, 2019, you are considered engaged in business in all districts in California if, in the preceding or current calendar year, your total combined sales of tangible personal property in this state or for delivery in this state exceed $500,000.)

Materials

Construction contractors are generally the consumer of materials furnished and installed during the performance of a construction contract.

As the consumer of materials, you generally may not issue a resale certificate to your supplier for materials you will knowingly consume during the performance of your construction contract. Therefore, you will generally pay sales tax reimbursement, including district sales tax reimbursement, to your supplier based on the tax rate where the sale occurs, even if your jobsite is not located in a taxing district.

District use tax generally applies to the use of the materials at the jobsite in a district imposing district taxes. If you install materials at a jobsite in a district with a lower total tax rate than the district where the sale occurred, you may claim a credit against the district use tax liability. If you install materials at a jobsite in a district with a higher tax rate than the district where the sale occurred, you are liable for the amount of district use tax in excess of the reimbursement you paid for district sales tax.

If a contractor does not hold a seller's permit or is not otherwise required by law to report use tax in a different manner, the additional use tax liability can be paid by providing, in writing, all the following information:

1. A request that the correspondence be accepted as a return or a statement, regardless of how brief, indicating that you are attempting to file a return, and
2. The reporting period for which the correspondence (return) is filed, and
3. The amount of tax due for each district.

Your total reported use tax should be segregated by district based on where the materials were installed. This will assist CDTFA in distributing the use tax to the proper district.

If you do not have a seller's permit and are not required to register for a use tax account as a “qualified purchaser,” you can report your purchase(s) subject to use tax on our website by selecting Register, and then under Registration, select Register a New Business or Location. Once you have registered, you can pay any use tax due by filing your return. You can also register to report use tax in person at any of our offices.

1. The rates provided are for example only and may not reflect the actual district tax rates. For current sales and use tax rates, please see our webpage California City & County Sales & Use Tax Rates.

Sales of Fixtures (and Materials When the Contractor is the Retailer of Materials)

Construction contractors are the retailers of fixtures and must have a valid seller's permit when making retail sales. If your jobsite is in a taxing district and you are making retail sales of fixtures in connection with a construction contract, you are required to collect, report, and pay district sales tax based on the rate imposed there.

If you did not issue a resale certificate and paid district sales tax for fixtures to your supplier at a higher district tax rate then the rate imposed at your jobsite location, you are allowed to take a tax-paid purchases resold deduction for the sales tax, including district sales tax. This is also true when you are considered the retailer of materials, for example, when the contract explicitly passes title to the materials prior to installation and the contract separately states the sale price of the materials exclusive of any charges for installation.

For more information about the application of sales and use tax to construction contractors and a more complete listing of property qualifying as materials, fixtures, machinery, and equipment, see Regulation 1521, Construction Contractors, and publication 9, Construction and Building Contractors.

Note: Mobile transportation equipment includes rail cars, locomotives, truck tractors and trailers, ships, reusable shipping containers, and airplanes. The law considers lessors of mobile transportation equipment to be consumers of the equipment. Consequently, they are usually required to pay tax on the purchase price.

District Use Tax Due on Purchase Price

As a lessor, if you lease the property in substantially the same form as acquired, you may make a timely election to pay use tax, including applicable district use tax, on the purchase price. If you do not make such a timely election, you must report and pay tax based on rental payments received.

District Use Tax Due on Lease Receipts

District use tax applies to lease receipts when:

• The property is used in a taxing district, and
• The payments are subject to the basic statewide use tax.

District use tax applies to lease receipts only while the property is used in an area with applicable district tax. If the property is moved into another district, the property would be subject to the district tax imposed at the new location; if moved to a location without district tax, no district tax would apply. Similarly, leased property which is first used outside a district and then moved into a district becomes subject to the district tax.

For more information on leases, including leases of motor vehicles, vessels, aircraft, and mobile transportation equipment, see publication 46, Leasing Tangible Personal Property.

The most common types of temporary seller's include sellers of:

• Fireworks
• Garage sales
• Christmas trees
• Property sold through Internet auctions
• Crafts
• Property at conventions, trade shows, swap meets, flea markets or other special events

District sales tax is due on sales that occur in an area with applicable district tax.

1. The rates provided are for example only and may not reflect the actual district tax rates. For current sales and use tax rates, please see our webpage California City & County Sales & Use Tax Rates.

Catering sales made in a taxing district, including where your business is located, will be subject to district tax. You will be responsible to collect, report, and pay district tax based on the rate in effect where the catering occurs.

If you are a caterer, our Tax Guide for Caterers may also be a helpful resource.

1. The rates provided are for example only and may not reflect the actual district tax rates. For current sales and use tax rates, please see our webpage California City & County Sales & Use Tax Rates.

As an itinerant merchant, you generally should collect, report, and pay district tax based on your permanent address shown on your seller's permit unless you deliver the property to the buyer outside the district for use outside the district. If your permanent address is not in a taxing district, your sales are generally exempt from district tax. However, they may be subject to district use tax if you solicit the sale in a district and ship or deliver the property to the buyer in the district. For the definition of “engaged in business,” please see the Retailer Engaged in Business in a District section.

When you travel to taxing districts other than where your registered place of business (usually your home address) is located and make taxable sales in those districts, you are considered engaged in business. District tax is due using either the effective city or county district tax rate, whichever applies.

1. The rates provided are for example only and may not reflect the actual district tax rates. For current sales and use tax rates, please see our webpage California City & County Sales & Use Tax Rates.

If you are an auctioneer holding an auction at a location with applicable district tax, your sales are subject to district tax in the same manner as other types of retailers unless otherwise exempt.

Please see the following resources for additional information on how district tax applies:

• Regulation 1610, Vehicles, Vessels, and Aircraft
• Publication 52, Vehicles and Vessels: Use Tax
• Publication 44, District Taxes (Sales and Use Taxes)
• Publication 105, District Taxes and Sales Delivered in California
• Publication 34, Motor Vehicle Dealers

The sales and use tax return includes CDTFA-531-A2, Schedule A—Computation Schedule for District Tax, to report your district tax. Depending on your business activities, if you make sales in taxing districts, you will be prompted to file Schedule A when you file your return online.

If you are not “engaged in business” in a district, then your customers are the people liable for the district use tax on tangible personal property purchased from you for storage, use, or other consumption in that district. As a courtesy to your customers, you may collect the district use tax from them and report and pay it on their behalf. If you do charge and collect the tax, you are liable for it.

If you collect excess district tax or tax reimbursement from your customer, you should either 1) refund the over-collected amount to your customer, or 2) report and pay the over-collected amount on your sales.

For questions about how to report your over-collected district tax, please contact our Customer Service Center at 1-800-400-7115 from 7:30 a.m. to 5:00 p.m. (Pacific time), Monday through Friday, except state holidays.

You may find the tax rates for each district on our California City and County Sales and Use Tax Rates webpage. This webpage includes a look-up tool, Find a Sales and Use Tax Rate by Address, located under the Current Tax Rates section, which allows you to find a tax rate based on an address.

To further assist you in finding the correct tax rate, our rate look-up service may also be integrated into your sales software to compute the tax rate for each of your sales. To see if our service will work with your application, select the Looking for the Tax Rate API link at the bottom of the Find a Sales and Use Tax Rate by Address page.