Do you own a business that collects/remits sales tax? Are you often confused by the rules for what is taxable or not taxable in CA? Here are a few answers to frequently asked questions.
1. What is taxable?
Retail sales of tangible personal property are generally subject to sales tax. Examples of tangible personal property include such items as furniture, giftware, toys, antiques, clothing, etc. In addition, some service and labor costs are subject to sales tax if they result in the creation of tangible personal property.
2. Are Wholesale Transactions Taxable?
When you sell to another business who is buying the item to resell in the regular course of business, tax will not apply to your sale. To document a sale for resale, you should obtain a timely and valid California resale certificate from your customer. You may claim a deduction for your sales for resale on your sales and use tax return. Tax is collected by the business who sells to the final consumer of the product.
3. Are Sales of Food Products Taxable?
Tax on food product sales depends on many conditions, including, who makes the sale, where the sale occurs, who the customer is, and what is sold. The following sales are generally taxable:
Sales of alcoholic and carbonated beverages;
- Sales of hot prepared food products;
- Food sold for consumption where there is an admission charge; or
- Sales of food and beverages if those items are served for consumption at your place of business. You are considered to have a place of business where customers may consume their purchases if, for example:
- You provide tables and chairs or counters for dining, or provide trays, glasses, dishes, or other tableware; or
- You are located in a shopping mall and are near dining facilities provided by the mall. For example, you are located in or near a food court or near an area where tables and chairs are provided for dining.
4. Can I claim a deduction for items I paid tax on and later resold?
If you purchase an item and pay California sales or use tax on the purchase but sell the item prior to making any use of the item, you may deduct from the sales price the amount you previously paid your vendor for sales tax or the amount of use tax you paid the state. You may claim a deduction for tax-paid purchases resold on your sales and use tax return.
5. Are barters and exchanges taxable?
Yes. The use of barter or exchanges is considered the same as making sales or purchases under the Sales and Use Tax Laws. The fair market value of the property or services received is normally the amount to which tax will apply.
For more information on sales and use tax, see www.boe.ca.gov.
Candy
