California sales tax for online stores

The short version

• The statewide sales and use tax rate is 7.25%.
• Many areas add district taxes, from 0.10% to 2.00% each, and some areas have more than one.
• Businesses engaged in business in California that sell tangible goods need a seller's permit, which has no fee.
• Sellers outside California have to register and collect once their California sales pass $500,000 in the current or preceding calendar year.

Who has to collect

The CDTFA says you need a seller's permit if you are engaged in business in California and intend to sell or lease tangible personal property that would ordinarily be subject to sales tax at retail. That includes businesses that sell online.

Retailers outside California must register once their total combined sales of tangible personal property for delivery in California, together with related companies, exceed $500,000 in the preceding or current calendar year. The total can include nontaxable sales, such as sales for resale. These sellers register for a Certificate of Registration - Use Tax and collect California use tax, and district use tax where it applies.

Statewide rate and district taxes

Because district taxes stack, the total rate depends on where the goods are delivered. The CDTFA offers a rate lookup map and publishes rate tables by city and county.

Remote sellers over the $500,000 threshold collect district use tax on sales delivered into districts that impose one.

What is generally taxable

California sales tax applies to retail sales of tangible personal property: the CDTFA gives examples such as furniture, giftware, toys, antiques and clothing. Making a new item to order is also taxable.

Some charges are treated differently. For example, the CDTFA says installation charges stated separately on the invoice are not ordinarily taxable, and repair labor is not taxable because it does not create new property. Check how your own products are treated before you start collecting.

Registration and filing

• Register online with the CDTFA. There is no fee for a seller's permit.
• The CDTFA may ask for a security deposit when you apply, to cover possible unpaid tax.
• Remote sellers over the threshold register for a Certificate of Registration - Use Tax, even if they did not have to register before.
• Your filing frequency is set by the tax agency, and you file returns for each period on that schedule.

Selling through marketplaces

Since October 1, 2019, under California's Marketplace Facilitator Act, a marketplace facilitator is treated as the retailer for sales made through its marketplace, and collects and pays the tax on them.

You do not need your own seller's permit or Certificate of Registration - Use Tax if all of your retail sales are facilitated by a marketplace facilitator registered with the CDTFA. If you also sell on your own website, you register for those direct sales when the rules above apply.

How Stripe Tax handles it on your store

Stores we build on our engine can take payments through Stripe, and on Stripe checkout Stripe Tax calculates the tax automatically from the product type and where the buyer is, adds it at checkout and shows it on the receipt.

Stripe Tax only collects where you have told it you are registered. You register with the CDTFA first (or ask Stripe to register for you), then add the registration in the Locations tab of your own Stripe account. Stripe also tracks your sales against state thresholds and alerts you when you may need to register.

You stay responsible for filing and paying the tax you collect. Stripe offers automated US filing through partners at an extra cost, but the obligation is yours. Stripe Tax works only on Stripe checkout, not on Wompi or Bold.