You must keep your business records for at least four years. If you are being audited, retain all records that cover the audit period until the audit is complete, even if that period is longer than four years.

Your records should be adequate so CDTFA representatives may:

• Verify the accuracy of your tax returns; and
• Determine if you have correctly paid the tax due on your sales and purchases.

Records you should keep include, but are not limited to:

• Cash register tapes
• Purchase invoices
• Sales invoices
• Shipping documents
• Resale certificates
• Tax returns and supporting worksheets

The sales and use tax rate that you are required to report and pay will vary depending on where you do business (For online sales, please refer to the Industry Topics tab, under the heading Internet Sales). You are responsible for the statewide tax rate and any applicable district taxes in cities and counties where you are engaged in business.

Generally, you are engaged in business in a district when you:

• Own or lease real or tangible personal property, including, but not limited to, a computer server, in the district;
• 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 the district (whether or not it is related to your sales activities);
• Have a representative, agent, or independent contractor operating in the district on your behalf or under your authority, or under the authority of your 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;
• Use your own delivery vehicles to regularly deliver merchandise into or within the district;
• Receive rental payments from the leases of tangible personal property located in the district, such as leases of machinery, equipment, and furniture;
• Sell or lease vehicles or undocumented vessels which will be registered in the district; or
• Have total combined sales of tangible personal property in California, or for delivery in California, by you and all persons related to you exceeding $500,000 in the preceding or current calendar year.

Beginning April 25, 2019, if you are required to be registered with CDTFA, whether located inside or outside California, and you meet the $500,000 threshold, you are engaged in business in every district in California, whether or not you have a physical presence in those districts. As such, you are required to collect the district use tax on taxable sales made for delivery in those districts that impose a district tax. If you do not meet the $500,000 threshold, you are still engaged in business in any districts(s) in which you have a physical presence. For more information, see the online guide Use Tax Collection Requirements Based on Sales into California Due to the Wayfair Decision .

Example 1:
If you sell crafts from your home and ship your crafts by common carrier into a county where you are not engaged in business, you owe tax at the statewide rate (currently 7.25 percent).

Example 2:
If you sell goods at craft fairs, the applicable sales tax rate is the rate where the craft fair is located.

For more information on being engaged in business and the correct district tax rates, please see publication 44, District Taxes (Sales and Use Taxes).

You can look up tax rates by city and county or find the full tax rate in your city or county by going to the Find a Sales and Use Tax Rate webpage and entering the address as prompted.

In addition, use tax applies to the use, storage, or other consumption of goods, including vehicles, within the state. Therefore, you must report and pay the use tax due on any home-based business related purchases on your sales and use tax return in the period in which your business first used, stored, or consumed the goods in California.

For more information, please see California Use Tax Information.

Inventory Withdrawals
As a registered seller's permit holder, you are entitled to purchase goods without payment of tax that you plan to resell (see Purchases for Resale below). However, if you remove goods from resale inventory and make use of the goods rather than reselling them, you owe use tax on the purchase price of the goods. For example, if you give away goods as a gift instead of reselling them, you must report and pay the use tax due on your sales and use tax return, on those goods withdrawn from resale inventory.

Example:
You sell home-made holiday ornaments from your home and at special events. You may generally purchase the items you use to make ornaments tax free, by giving your supplier a timely resale certificate. At the special event, as a promotion for your business, you give away small ornaments. You will be considered the consumer of any ornaments you give away and you will owe use tax on the purchase price of the material you used to make the ornaments.

When your vendor accepts a valid resale certificate in good faith and in a timely manner, the vendor does not owe tax on that sale. You can provide CDTFA-230, General Resale Certificate, to your vendor when purchasing goods you will resell in the regular course of your business operations.

Generally, resale certificates are used:

• When purchasing finished items for resale.
• When buying materials that will become a physical part of an item that will be held for resale. ²
• When purchasing items solely for demonstration or display while holding them for sale in the regular course of business operations.

As the purchaser, you should not use a resale certificate when buying a product that you will:

• Use rather than sell,
• Use in your business before you sell it,
• Use for a personal purpose, or
• Hold as an investment for appreciation in value and for sale in the future.

For more information on using a resale certificate, see publication 103, Sales for Resale.

¹ Section 6015 retailers cannot accept resale certificates from their agents, unless the agent holds a California Sales or Use Tax Permit and sells the goods through a storefront. For more information on Section 6015 retailers, please see the Industry Topics tab, under the heading 6015 Retailers.

² The purchaser must report use tax on their sales and use tax return on the purchase price of materials they purchased without tax, when the material is incorporated into an item that is later given away for free.

Exempt and excluded sales are transactions not subject to tax and a deduction for those transactions can be taken on your sales and use tax return. You must retain all documentation to support the deduction. Some common exempt sales transactions include:

• Food – see Tax Guide for Restaurant Owners and/or Tax Guide for Grocery Stores,
• Nontaxable Labor – see publication 108, Labor Charges,
• Sales for Resale – see publication 103, Sales for Resale, and
• Sales in Interstate or Foreign Commerce – see publication 101, Sales Delivered Outside California.

For a list of all exemptions, please see publication 61, Sales and Use Taxes: Tax Expenditures.

We encourage you to visit the Governor's Office of Business and Economic Development webpage (GO-Biz) to help you determine if other state, federal, and local agencies have any licensing or registration requirements that may affect you.

GO-Biz offers extensive information, including:

• CalGold – Provides information about other federal, state, or local government permits that may be required for your business.
• California Business Portal – Provides personalized business assistance, including quick start guides for starting and growing your business, and the California Business Navigator which provides custom information for your business regarding permits, licenses, and incentives.

CDTFA also partnered with the Employment Development Department, the Franchise Tax Board and Internal Revenue Service to establish the California Tax Service Center. The website acts as a one-stop source for the latest tax information.

There is no general tax exemption for sales of tangible personal property (merchandise) made over the Internet. Therefore, your retail Internet sales that take place in California, or are for delivery in California, are generally subject to sales or use tax, unless a specific exemption or exclusion applies.

You are responsible for collecting and paying the tax on your Internet sales, which includes sales you make through Internet shopping platforms or Internet auction houses. The responsibility exists unless the shopping platform or Internet auction house is owned or operated by a marketplace facilitator, as defined in the Marketplace Facilitator Act, which is responsible for paying and collecting the tax on your Internet sales. For more information on who is responsible for the tax on sales facilitated through a marketplace, please see our online guide, Tax Guide for Marketplace Facilitator Act.

Beginning October 1, 2019, marketplace facilitators (as defined by Revenue and Taxation Code, section 6041(b)) that own or operate Internet auction houses and other Internet shopping platforms may be required to pay and report the tax to CDTFA and report and pay tax on sales of merchandise facilitated through their marketplace (e.g., Internet website). You should contact your Internet auction house where you sell merchandise to determine if they are a marketplace facilitator and are responsible for the tax on sales made through their auction house.

If all your sales of merchandise will be facilitated by a marketplace facilitator that is registered as a seller or retailer with CDTFA, beginning October 1, 2019, you are not required to obtain a seller's permit or a Certificate of Registration - Use Tax from CDTFA.

For more information, please see Publication 177, Internet Auction Sales and Purchases, Publication 109, Internet Sales, and our online guide, Tax Guide for Marketplace Facilitator Act.

Additional registration information is also available for online retailers on the Online Retailers: Registration and Local Tax tab of our Local and District Tax Guide for Retailers.

Typically, section 6015 retailers include multi-level marketing retailers that solicit sales through a network of individual salespeople or representatives. Individuals who sell these products have "shows" or "parties" and sell merchandise at their own home, a customer's home, on the Internet, or through direct sales to friends and family.

If you are an agent of a section 6015 retailer, that company will remit sales tax to CDTFA on your behalf. The section 6015 retailer is regarded as the retailer and collects the sales tax on the suggested retail sales price when they sell the items to you.

Section 6015 retailers cannot accept resale certificates from you unless you hold a California Sales or Use Tax permit and sell the products through a storefront. A storefront does not include home-based businesses.

For more information, please see RTC section 6015.

Each garage sale is considered a single sale, even though multiple items may be sold. When a person holds less than three (i.e. one or two) garage sales, of used goods that were accumulated for their own use, within a 12-month period, they are usually considered to be an occasional seller and not a retailer. However, if a person holds a third garage sale within a 12-month period, they are considered to be a retailer and are required to hold a seller's permit.

If, in addition to the services you provide, you regularly make sales of items to consumers, you will generally be considered the retailer of the items you sell and you are required to hold a seller's permit. Unless otherwise exempt, your sales of those items are subject to tax. In addition, any services that you provide that are part of the sale of the item sold will generally be taxable as well.

Below are some common service industry home-based businesses that may also make sales of goods:

Interior Designers or Decorators

An interior designer or decorator generally provides services such as design, repair, color coordination, and planning. In addition to the services mentioned, an interior designer or decorator may also sell goods, such as furniture, window coverings, carpeting, home accessories, cabinets, and samples. Therefore, if you are an interior designer or decorator and you sell any goods to your clients, your sales of goods are taxable and you are required to hold a seller's permit.

In general, your fees charged for consultation, layout, coordination of furniture and fabrics, selection of color schemes, etc., are considered charges for professional services. The charges are not subject to tax when they are not directly related to your sale of goods. However, tax does apply to your charges that are directly related to acquiring and providing furnishings and other goods you sell to a client. Your fees for nontaxable charges should be separately stated from charges related to sales of goods.

Example:
When you charge fees to accompany a client to a showroom to select furniture the client is buying from you, those fees are taxable, because it a part of your taxable sale of furniture to your clients.

For more information on the application of tax to charges from interior designers, please see publication 35, Interior Designers and Decorators.

Photographers

As a photographer who makes sales of printed photos or related goods, you are required to hold a seller's permit. You are generally making a sale of goods when you transfer photos to your customer in a tangible form. Tangible forms include prints as well as electronic files contained on tangible media (e.g.CD, flash drive or DVD). The sales of printed photos and related goods are treated the same as other goods and are generally taxable unless a specific exemption or exclusion applies.

Photography services are generally subject to tax if they are part of the sale of tangible property (e.g. photos). However, your fee 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, and
• There is no intent of later providing printed photos or goods to your customer.

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.

Example:
You enter into a contract with a client to provide them with photography services and a link to their digital images. When you electronically transfer copies of the images, tax does not apply to the charges for the service or for the digital images. The sale of the electronic data is not a taxable transaction.

However, if you provide printed photos with your photography services, tax applies to the entire charge. The printed photos are tangible personal property and the sale of the printed photos is subject to tax. When the printed photos are transferred to your client, tax would apply to the gross receipts. The gross receipts would include all charges that are related to the production and creation of the printed photos, including your photography services.

For more information on the application of tax to charges from photographers, please see publication 68, Photographers, Photo Finishers, and Film Processing Laboratories, or our Tax Guide for Photography.

However, tax does apply to sales of hot and cold food products that are sold:

• To be consumed on the business premises, or
• In a form to be consumed at tables, chairs, or counters or from trays, glasses, dishes, or other tableware (provided by the retailer or by a person with whom the retailer contracts to furnish, prepare, or serve food products to others), or
• At an event where admission is charged.

Unlike a restaurant, home-based businesses do not generally sell prepared food to be consumed at the place of business. However, if you prepare and sell food products from your home, and you meet one of the conditions mentioned above, your sales of food products are taxable.

Below are some common retailers of food (some who generally do not operate from a physical location) and the application of tax to their business.

Caterers

A caterer is in the business of serving meals, food or drinks on the premises of the customer, or on the premises supplied by the customer.

Tax generally applies to charges made by caterers for:

• Prepared hot/cold food and drinks even though the ingredients may not be provided by the caterer;
• Prepared hot/cold food whether or not served by the caterers; and
• Any other services related to the preparation and serving of food for clients (e.g. cutting and serving a cake provide by the customer).

For more information on caterers, please see Tax Guide for Caterers.

Mobile Food Vendor

A mobile food vendor does not have a physical location and generally sells food or drinks from a truck, stand, or wheeled cart. If you are a mobile food vendor (e.g. a hotdog cart), you must report tax on your sales of hot, prepared food and carbonated beverages, such as sodas. In addition, your sales of cold food are taxable when:

• Sold for consumption at tables that you provide, or
• Sold at a place that charges admission such as swap meets, trade shows, etc.

For more information, please see publication 287, Mobile Food Vendors Tax Guide and Tax Guide for Caterers.

Home-Based Bakeries

The sales of baked goods such as bread, cookies, cakes, including wedding cakes, are generally not taxable, when sold on a "to go" basis, or sold for resale (e.g. to a caterer). However, if the cakes are sold for consumption at the home-based business location, the sales are subject to tax.

For example, if you charge your customer a cake tasting fee, tax would apply to your charges as the cake is considered to be consumed at your home-based business location.

As a seller at swap meets, flea markets and special events, you are required to provide specific information to the operator of the event in order to sell there. You can use form CDTFA-410-D, Swap Meets, Flea Markets, or Special Events Certification, to provide the required information. Your sales are generally subject to sales tax unless they qualify for a specific exemption or exclusion.

Temporary Sellers

If you will be selling items 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. However, if you participate in three or more swap meets, flea markets, and special events in a 12-month period, you must obtain an ongoing seller's permit. If you already hold a seller's permit for a permanent place of business (your home-based business location) 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. You can register a temporary location online, under Register a Business activity with CDTFA, click Add a new location to an existing account link and follow the prompts.

Example 1:
You sell your handmade soaps at two craft fairs annually. You make no other sales at any other time in a 12-month period. You will be required to obtain a temporary seller's permit for each fair and register each location.

Example 2:
You sell your handmade soaps at two craft fairs annually. In addition, you also sell your handmade soaps online. Since you make more than two sales in a 12-month period and are engaged in the business of making handmade soaps, you will need to obtain an ongoing seller's permit.

Sales Made on State-Designated Fairgrounds

Effective July 1, 2018, if you are a retailer who makes sales of tangible personal property that take place on the real property of a California state-designated fair ("state-designated fairground"), you must separately state the amount of those sales on your Sales and Use Tax return. Sales that take place on state-designated fairgrounds include over-the-counter sales on the fairgrounds and also may include sales in which the property is shipped or delivered to or from the fairground.

The separately reported amount will be used for funding allocation purposes only. There is no additional tax or fee due on these sales. For more information on the new reporting requirement, please see Tax Guide for Reporting Requirements on State-Designated Fairgrounds.

Under Revenue & Taxation Code section 6018.3, you were considered a qualified itinerant veteran vendor if all of the following applied:

• You were honorably discharged from the United States Armed Forces,
• You were a sole proprietor with no employees,
• You had no permanent place of business in this state, and
• You were unable to obtain a livelihood by manual labor due to a service-related disability.

However, if you sold alcoholic beverages or taxable items for more than $100, you were considered a retailer of those items and were required to obtain a seller's permit and report tax on those sales.

Examples of qualified itinerant veteran vendor businesses included:

• Swap meets or flea market vendors,
• Lunch wagon operators, or
• Coffee cart operators.

Starting January 1, 2022, itinerant veteran vendors who previously qualified for the above exemption are required to obtain a seller's permit, file sales and use tax returns, and remit tax on their retail sales in California.

If you are not sure whether you need a seller's permit or whether your sales are taxable, you may contact our Customer Service Center for help at 1-800-400-7115 (CRS:711). Customer service representatives are available Monday through Friday from 7:30 a.m. to 5:00 p.m. (Pacific time), except on state holidays

For more information about allocating local tax, please visit our Local and District Tax Guide for Retailers.

Note: If you are an online retailer, you are required to collect, report, and pay tax like other retailers, but how you allocate your internet transactions can depend on several factors. For more specific information on local tax reporting requirements for online retailers, see the Online Retailers: Registration and Local Tax tab of our Local and District Tax Guide for Retailers.

For more information, please see Publication 44, District Taxes (Sales and Use Taxes) and our online guide, Local and District Tax Guide for Retailers.