In this article
- What is sales tax in California?
- What is taxable in California?
- Exemptions and resale certificates in California
- Who must collect sales tax in California?
- Sales tax rates in California
- How to calculate sales tax in California
- How to register for a California sales tax permit
- Filing and payment in California
- Penalties and compliance risks in California
- How Quaderno helps with California sales tax
- Sales tax guides for neighboring states
California has a 7.25% state sales tax with local additions bringing combined rates up to 11.25%. You must register if your annual sales into California exceed $500,000. SaaS and most digital products are generally not taxable in California, because no tangible personal property is transferred.
Whether you sell physical goods, software, or digital content into the Golden State, this guide covers everything you need to know — rates, taxability, nexus rules, registration, and filing. For step-by-step registration instructions, see the California Sales Tax Registration Guide.
What is sales tax in California?
California imposes a sales tax on the retail sale of tangible personal property. The California Department of Tax and Fee Administration (CDTFA) administers the tax at the state level. The base statewide rate is 7.25%, made up of 6% state tax plus a mandatory 1.25% local rate. Local jurisdictions — counties, cities, and special districts — can add further taxes, bringing some combined rates to 11.25%.
California uses a modified origin-based sourcing rule. Sellers with a California location charge based on the point of sale. Remote sellers without a California location use destination-based sourcing.
What is taxable in California?
California taxes most retail sales of tangible personal property. A distinctive feature of California's sales tax is that it generally does not apply to services or electronically delivered digital goods, making California one of the most software-friendly states from a sales tax perspective.
Digital products and SaaS taxability in California
California's treatment of digital goods and SaaS is unusual compared to most US states:
- SaaS: Generally not taxable. California does not tax SaaS because no tangible personal property is transferred to the customer. Cloud-based software accessed remotely falls outside the California sales tax base.
- Downloaded software: Whether taxable depends on the circumstances. Historically, downloaded software has been treated as taxable as tangible personal property in some contexts, but the line is complex. Consult the CDTFA for guidance on your specific product.
- Digital products (streaming video, streaming music, e-books): Generally not taxable in California, for the same reason as SaaS — no tangible personal property is transferred.
This non-taxability of digital goods and SaaS is one of California's most important distinctions for online businesses. If you sell only SaaS or streaming content to California customers, you may have no sales tax obligation.
Sales tax on shipping charges in California
California does not tax separately stated shipping and handling charges for taxable goods, as long as they are listed clearly on the invoice and are not bundled into the product price. Always separate shipping charges from the product price on your invoices.
Exemptions and resale certificates in California
California has a number of important sales tax exemptions. Key non-taxable items include:
- Most groceries and food for home consumption (with exceptions for hot prepared food)
- Prescription drugs and most medical devices
- Agricultural supplies and equipment
- Manufacturing equipment used in production
- Items purchased for resale, with a valid California Resale Certificate
- Sales to qualifying exempt entities (government agencies, certain nonprofits)
- SaaS and most digital goods (as described above)
To claim a resale exemption, the buyer must provide a valid California Resale Certificate at the time of purchase. The CDTFA provides current certificate forms.
Who must collect sales tax in California?
Nexus is the legal connection between your business and California that creates a sales tax obligation. If you have nexus, you must register, collect, and remit sales tax on taxable California sales.
Economic nexus in California
You have economic nexus in California if your sales of tangible personal property into the state exceed $500,000 in the current or previous calendar year. California's threshold is one of the highest in the US — the same as Texas — so many smaller online businesses do not reach it.
To learn more, see the Ultimate Guide to US Economic Nexus.
Physical nexus in California
| Type of nexus | Definition |
|---|---|
| Physical presence | Having a store, office, warehouse, distribution center, or other business location in California. |
| Employees or representatives | Having employees, agents, or contractors working on your behalf in California. |
| Inventory | Storing inventory in California, including through Amazon FBA or other third-party fulfillment centers. |
| Affiliate nexus | Having affiliates in California that refer customers to your business through links or advertisements. |
| Leasing property | Owning or leasing real or tangible personal property within California. |
Marketplace facilitator rules in California
Marketplace facilitators in California are required to collect, report, and remit sales tax on behalf of marketplace sellers for sales made through their platform. Marketplace sellers must count sales made through marketplaces toward their $500,000 economic nexus threshold.
See our state-by-state guide to marketplace facilitator laws for more information. Amazon FBA sellers should also consult the Amazon FBA Sales Tax Guide.
Sales tax rates in California
California has a 7.25% base statewide rate (6% state + 1.25% mandatory local). Counties and cities can add further taxes, and special districts can layer additional taxes on top. Some areas of California have the highest combined sales tax rates in the country.
How California sales tax is structured
| Level | Description |
|---|---|
| State sales tax | The statewide base rate is 7.25% (6% state + 1.25% uniform local rate). |
| County tax | Counties can add their own sales tax on top of the base rate. |
| City tax | Some cities impose their own sales tax on top of the state and county rates. |
| District tax | Special taxing districts (transportation, schools, local improvements) can levy additional taxes. Multiple districts can overlap within the same city. |
California sales tax by city
Combined rates vary significantly. Some examples:
| City | Combined rate |
|---|---|
| Los Angeles | 10.25% |
| San Francisco | 8.625% |
| Oakland | 10.75% |
| San Diego | 7.75% |
| Alameda | 10.75% |
| Anaheim | 7.75% |
Rates can also vary within a single city depending on which special districts overlap at a given address. Use Quaderno's Sales Tax Calculator to find the exact rate for any California address.
How to calculate sales tax in California
For remote sellers, California uses destination-based sourcing — you charge the combined rate at the buyer's address. Because rates vary widely, always look up the rate at the customer's specific address.
Example: You sell a $100 physical item to a customer in Los Angeles (10.25%). Sales tax is $10.25, making the total $110.25.
Example: You sell a $100 SaaS subscription to a business in San Francisco. SaaS is generally not taxable in California — no sales tax applies.
Use Quaderno's Sales Tax Calculator to find the exact combined rate for any California address automatically.
How to register for a California sales tax permit
If your business has nexus in California, register before collecting sales tax. Register online through the CDTFA Online Services portal. The CDTFA Online Services portal is also where you'll file returns and make payments. There is no charge to register.
For a detailed walkthrough of the registration process, see our California Sales Tax Registration Guide.
For a step-by-step walkthrough of the registration process, see the California Sales Tax Registration Guide.
Filing and payment in California
How often do you file sales tax in California?
California assigns your filing frequency at registration based on your expected annual tax liability — monthly, quarterly, or annually.
When are California sales tax returns due?
Due dates depend on your assigned filing frequency. Monthly filers generally submit returns by the last day of the month following the reporting period. Quarterly filers submit on a different schedule. Check CDTFA Online Services for your specific due dates.
How to file and pay California sales tax
File and pay online through the CDTFA Online Services portal. For step-by-step guidance, see our California Sales Tax Filing Guide.
Penalties and compliance risks in California
Late filing or payment triggers penalties and interest. Common compliance risks in California:
- Misclassifying digital products as taxable — California generally does not tax SaaS or digital goods; overcollecting creates its own compliance liability.
- Using incorrect combined rates — California's complex district tax system means rates can vary even within the same zip code or city.
- Inventory creating nexus — storing inventory in California (including through Amazon FBA) creates physical nexus regardless of economic threshold.
For penalty details, see the CDTFA.
How Quaderno helps with California sales tax
Quaderno automatically calculates the correct California rate for every customer address, correctly identifies non-taxable SaaS and digital goods, and keeps your records organized. Stop worrying about compliance and focus on growing your business.
Sales tax guides for neighboring states
If you sell across the West Coast or Southwest, you may have sales tax obligations in these states too.
Note: At Quaderno we love providing helpful information and best practices about taxes, but we are not certified tax advisors. For further help, or if you are ever in doubt, please consult a professional tax advisor or the tax authorities.