Tax Guide for the Gig Economy
The gig economy has created new opportunities for where and how to work just as it has opened new ways for consumers to do business and receive services. The term “gig” used in this guide refers to a job for a specified period. The gig economy is based on flexible, temporary, or freelance jobs, often involving connecting with clients or customers through an online platform or mobile applications. Online platforms and mobile applications have made it increasingly easy for independent workers to contract with clients for any type of work, from creative endeavors, to ride-hailing, meal delivery, and technical consulting.
Whether done as a temporary “gig” or as part of a full-time business, retail sales of tangible personal property in California are subject to sales and use tax unless the law provides a specific exemption or exclusion. Tangible personal property is an item (for example, merchandise, goods, etc.) that can be seen, weighed, measured, felt, or touched.
We realize that locating and reviewing all the information needed to manage your business activities can be overwhelming. We have created this guide to provide you easily accessible information and resources to assist you in understanding your sales and use tax obligations.
Working in the Gig Economy
Many “gigs” involve providing a service. You may be a driver for a ride-hailing service, deliver groceries, perform household tasks, or provide consulting services. When there is no tangible personal property transferred in a transaction, there is no “sale” under the California Sales and Use Tax Law. Therefore, if you provide a service rather than sell tangible goods, sales and use tax generally does not apply.
If you are making sales of tangible personal property, you are required to register with the California Department of Tax and Fee Administration (CDTFA) and file regular sales and use tax returns to report and pay tax. Here are some examples of when your “gig” will result in sales and use tax obligations:Open All Close All
Just as the name implies, pop-up restaurants often occur in unexpected places and for a limited time. If you are a chef, you may open a pop-up restaurant to showcase your talents to a wider audience, build your culinary reputation, or to test out a restaurant concept. If you open a pop-up restaurant, you are required to register for a seller's permit and report and pay tax. Most of your taxable sales are going to be food and beverages. However, charges that are part of your sales of tangible personal property such as mandatory tips, corkage fees, and cover charges, are also subject to tax.
If you will be selling at a location for less than 90 days, you are considered a temporary seller, and are required to hold a temporary seller's permit. You will need to register each temporary sales location. On the other hand, if you already hold a seller's permit for a permanent place of business but also make sales at a temporary location, you will not need to register for a separate temporary seller's permit. Instead, you must register for a sub-permit for each of your temporary locations and report the sales from the pop-up location on your regularly filed return.
For more information, please see publication 22, Dining and Beverage Industry, publication 115, Tips, Gratuities, and Service Charges, our Tax Guide for Restaurant Owners and our Temporary Sellers webpage.
Street food is ready-to-eat food typically sold by a vendor on the street or in other public places open to the public without an admission charge. The food is often sold from a portable food booth, truck, or cart. If you are a street food vendor and you make sales of hot prepared food or soda, even temporarily, you are required to register for a seller's permit and report and pay tax. Sales of cold food products are generally not taxed. Cold food products include cold sandwiches, milkshakes, smoothies, ice cream, and cold salads, among others.
If you will be selling at a location for less than 90 days, you are considered a temporary seller, and are required to hold a temporary seller's permit. You will need to register each temporary sales location. On the other hand, if you already hold a seller's permit for a permanent place of business but also make sales at a temporary location, you will not need to register for a separate temporary seller's permit. Instead, you must register for a sub-permit for each of your temporary locations and report the sales from the temporary location on your regularly filed return.
Generally, you are considered a caterer if you serve food or beverages on premises supplied by your customer. If you are a caterer, most of your taxable sales are going to be of food and beverages. However, charges that are part of your sales of tangible personal property such as mandatory tips, corkage fees, and charges for tables, and tableware are also subject to tax.
For more information on how tax applies to your catering charges, please see our Tax Guide for Caterers.
If you craft handmade items that you sell from your home and you make three or more sales in a 12 month period, you are considered a retailer and generally are required to hold a seller's permit and pay sales and use tax.
For more information, please see our Tax Guide for Home-Based Businesses.
If you are a photographer and make sales of printed photos or related goods, you are required to hold a seller's permit. You are making a sale of property when you transfer photos to your customer in a tangible form. Tangible form includes prints as well as electronic files contained on tangible media (for example, CD, flash drive or DVD). The sales of printed photos and related goods are generally taxable unless a specific exemption or exclusion applies. Charges for services that are part of the sale of tangible property (for example, photos) are also generally subject to tax.
Your fees charged for photography services, including taking photographs and editing, are not taxable when there is no transfer of photos or related goods in tangible form.
However, when you perform photography services that result in a sale of photos or related goods in tangible form, your entire charge is taxable regardless of whether you separate the charges for the services or labor performed in creating the printed photos or related goods.
For more information, please see publication 68, Photographers, Photo Finishers, and Film Processing Laboratories.
A handyperson is someone skilled at a wide range of repairs and tasks, typically around the home. These tasks include trade skills, repair work, and maintenance work. Examples may include light plumbing jobs, painting, sprinkler installation, changing a light fixture, or assembling and installing a ceiling fan. If you are a handyperson, you may also be considered a construction contractor.
In general, construction contracts mean a contract to erect, construct, alter, or repair any building or other structure or improvement on or to real property. Construction contractors are persons who for himself or herself, in conjunction with, or by or through others, agrees to perform and does perform a construction contract. Construction contractors make improvements to real property and often engage in building trades such as: carpentry, landscaping, electrical work, plumbing, painting, and installing floor coverings. Most construction contractors are required to register for a seller's permit. Generally, construction contractors are the consumer of materials and the retailer of fixtures that they furnish and install.
For purposes of construction contracting, materials are property that, when combined with other property, loses its identity to become an integral and inseparable part of the real property. Examples of materials include bricks, plaster, lumber, windows, and paint. Construction contractors are generally the consumer of materials they furnish and install. As a consumer, tax applies to the cost to you of materials you use in the performance of a construction contract.
Fixtures are accessories to a building or other structure that do not lose their identity as accessories when installed. Examples of fixtures include air conditioning units, prefabricated cabinets, furnaces, and signs. Construction contractors are the retailers of fixtures that they furnish and install. As a retailer, you owe tax on the selling price of fixtures you furnish and install in the performance of a construction contract.
Certain types of labor charges are subject to tax. Tax applies to charges for producing, fabricating, or processing tangible personal property for your customers. For example, your labor charges for assembling a customer's new barbecue are subject to tax. Tax does not apply, however, to labor or services related to nontaxable sales or itemized charges for repair labor. Repair labor is work on a product to repair or restore it to its intended use.
For more information, please see publication 9, Construction and Building Contractors, publication 108, Labor Charges, and our Tax Guide for Construction Contractors.
If you perform auto repairs and you purchase parts which you then resell to your customer, you are required to register for a seller's permit and report and pay tax. Tax generally does not apply to separately itemized charges for repair labor. Repair labor is work performed on a product to repair or restore it to its intended use (for example, replacing a broken water pump on a customer's used car).
If the retail value of the parts and materials furnished in connection with repair work is more than ten percent of the total charge, or if you make a separate charge for such property, you are the retailer and tax applies to the fair retail selling price of the property.
If the retail value of the parts and materials furnished in connection with the repair work is ten percent or less of the total charge and if no separate charge is made for such property, you are the consumer of the property, and tax applies to the cost of the parts or materials.
For more information, please see publication 25, Auto Repair Garages and Service Stations and our Tax Guide for Auto Repair Garages.
Online Registration – Register with us online for your seller's permit. In addition to holding a seller's permit, you may also need to register for another license or permit with the CDTFA. For more information about the permits or licenses the CDTFA administers, please see our Permits & Licenses page.
Filing and Payments
- Tax Return Filing Deadlines – Find your filing due dates.
- File a Tax Return Online – CDTFA's online filing service is easy, fast, and free!
- Online Payment Options – Make tax and fee payments online.
- Notice of Business Change – Keep your information current by using this form to notify us of any business changes.
- CDTFA Online Services – Learn about the online services CDTFA offers, including online registration for seller's permits and other accounts.
- CDTFA Offices – A comprehensive listing of all CDTFA offices and contact information.
- City and County Tax Rates – A listing of current and historical tax rates.
- Contact Us – A listing of CDTFA contacts for your questions and concerns.
- Find Your Tax Rate – You can look up the current sales and use tax rate for a specific address.
- Get It in Writing! – The Sales and Use Tax Law can be complex, and you are encouraged to put your tax questions in writing.
- Sign Up for CDTFA Updates – Subscribe to our email lists to receive the latest news, newsletters, tax and fee updates, and other announcements.
- Local and District Tax Guide for Retailers – A tax guide for retailers to learn more about how to properly collect, report, and pay local and district taxes.
For More Information
If you have any questions, please call our Customer Service Center at 1-800-400-7115 (CRS: 711). Representatives are available Monday through Friday, (except state holidays), from 8:00 a.m. to 5:00 p.m. (Pacific Time).