California Sales and Use Tax
Sales tax versus use tax
Sales tax applies to retail sales of tangible personal property in California; use tax applies when property is purchased without sales tax and used in California. Candidates must understand that the two are complementary and that the use tax often catches out-of-state purchases.
Key concepts
Master the definition of a sale, the treatment of leases, the occasional sale rule, and the resale certificate. Understand exemptions and exclusions - food products, prescription medicines, and certain services. Know that California generally does not tax services unless they are part of a taxable sale of tangible property. Familiarize yourself with the district taxes and how the combined rate varies by jurisdiction.
Traps
Common traps include confusing a sale for resale with a retail sale, treating a service as taxable when it is not, and missing the district tax component. Questions may test whether delivery charges are taxable (generally yes if part of a taxable sale) and how coupons and discounts affect the taxable measure.
Rule of thumb
If tangible personal property changes hands at retail in California, presume sales tax applies unless a specific exemption or exclusion fits.
Worked example
A buyer purchases furniture out of state, pays no sales tax, and brings it into California. Use tax applies at the California combined rate, and the buyer owes use tax on the purchase price.