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If you’re selling digital services and products to customers in California, then you might be liable for California’s sales tax. We’ve compiled over 10 years of experience in tax compliance to create this comprehensive guide, which covers how to file sales tax returns online and stay compliant with the state's regulations.
We’ve scoured the California Department of Tax and Fee Administration (CDTFA) website to provide you with all the necessary information about sales tax for businesses in one convenient place.
How to file sales tax returns in California
Sales and taxes should be reported and filed using US dollars. If you’ve made any transactions in California in a different currency, be sure to convert those to USD using official currency exchange rates.When to File and Pay
The timing for filing your return depends on your average monthly sales tax liability, and the CDTFA will assign you a filing frequency (monthly, quarterly, or yearly) after you register for a California sales tax permit. Businesses with an average monthly sales tax liability of $100 or less can file annually. Larger businesses are typically asked to file more frequently.
California sales tax returns and payments must be remitted at the same time; both have the same due date. The CDTFA requires all sales tax filing to be completed by the last day of the month following the assigned filing period. Due dates falling on a weekend or holiday are adjusted to the following business day.
California sales tax filing deadlines
| Filing Frequency | Reporting Period End | Report Due Date |
|---|---|---|
| Monthly | Varies | Last day of the following month |
| Quarterly | March 31 | April 30 |
| Quarterly | June 30 | July 31 |
| Quarterly | September 30 | October 31 |
| Quarterly | December 31 | January 31 |
| Yearly | December 31 (Previous Year) | January 31 |
Important Note: Zero Returns
Even if you didn’t make any sales in California during your reporting period, you must still file a "zero return." This follows the exact same process as a normal return, just with no tax liability to report. Failure to submit a zero return can result in penalties and interest charges.
California sales tax prepayments
Some businesses that file quarterly California sales tax returns are required to make monthly prepayments. According to Section 6471 of the California Sales and Use Tax Law, any business with an average monthly sales tax liability of $17,000 or more has to make prepayments.
In this scenario, instead of paying your sales tax liability at the time that you file your return, you'll make a payment each month during the quarter before you file that quarterly return. Prepayments are due on or before the 24th day of the following month. For example, your January prepayment would be due on or before February 24.
Each monthly prepayment has to be at least 90% of the tax liability due for that month. However, the rules for second-quarter prepayments are different:
- The initial prepayment, for the month of April, follows the usual guidelines of 90%.
- The second prepayment, for the month of May, is considered a prepayment for May 1 to June 15. As a result, it must equal one of the following amounts:
- 90% of the tax liability for May plus 90% of the tax liability for the first half of June.
- 90% of the tax liability for May plus 50% of the 90% tax liability for May as well.
How to prepare your California sales tax return
Before you start working on your sales tax return, you'll need to collect all the sales information for your tax period. The CDTFA online tax return system will guide you, but generally, you'll need the following details:
Sales transactions
Every business needs to know how much it sold—both in gross sales and in taxable sales—and to whom the business sold it. You are also required to collect and pay sales tax for any personal property sold to residents of California, with certain exceptions (e.g., if the buyer has a resale certificate or the item isn't considered taxable).
Filing a sales tax return requires the following information:
| Information Required | Description |
|---|---|
| Total Sales and Income | Gross sales revenue from buyers located in California. |
| Total Purchases and Expenses | Information related to business expenditures. |
| Taxable Sales by Type | Breakdown of taxable sales based on product categories. |
| Non-Taxable Sales by Type | Examples include sales to resellers, non-taxable labor, non-taxable foods. |
| Deductions | Examples include delivery charges. |
| Total Collected Sales Tax | The total amount of sales tax collected from customers. |
If the amount of taxable sales does not reach California's economic nexus thresholds, a sales tax return might not be required. However, if a business has employees, an office, or a warehouse located in California and is selling taxable goods and/or services, it must collect sales taxes, file returns, and pay the appropriate amount to the state.
Special taxing jurisdictions in California
In addition to state sales taxes, California sellers must manage district sales taxes. Whenever you make a sale to a buyer located in a town/city that charges more than the base state tax rate, you must collect the extra taxes for that district. For example, buyers in Los Angeles are subject to a 2.25% district tax in addition to the 7.25% California state tax, for a total of 9.5%.
There are hundreds of sales tax districts in California, which can make preparing a California sales tax return daunting. For more information, see CDTFA Publication 44.
Other required information for CA sales tax return
Some businesses will need to provide more information. For example, out-of-state businesses will need a list of all sales by county to complete Schedule B. Additionally, if you made monthly prepayments, have those amounts ready to calculate how much remains to be paid for the quarter when you file.
All businesses operating within California are required to fill in Schedule C, which lists the addresses of all your places of business for which seller's permits have been issued, along with the taxable amount sold in each location.
How to complete and file a California sales tax return
The final step is to file and remit tax. The CDTFA has an online filing system where you can enter your information to generate the return. You can log in to the California Taxpayers Services Portal.
How to pay
Tax payments must be in US dollars and can be made directly at the time of filing. Once you’ve completed the return, you’ll remit the total calculated sales taxes minus any monthly prepayments you’ve already made.
Payment options include:
- Direct transfer from your bank account (EFT)
- Credit card (with a 2.3% processing fee)
- Check
- Money order
Some high-grossing businesses might be required to pay by electronic funds transfer (EFT). If you have further questions about your payment options, head to CDTFA’s payment info page.
Late filing penalties and interest
Hopefully, you won't need to worry about this section because you're filing and remitting California sales tax on time. However, in the real world, mistakes happen.
If you miss a sales tax filing deadline, file your return as soon as possible. Failure to file returns and remit collected tax on time may result in penalties and interest charges, and the longer you wait to file, the greater the penalty and the greater the interest.
The CDTFA does not currently offer a timely filing discount for sales tax filers (as of March 2019). Publication 75 from the CDTFA offers the most accurate details pertaining to interest, penalties, and fees associated with the charges.
If you miss a California sales tax filing deadline due to unavoidable circumstances like weather or an accident, you might be eligible for an extension from the CDTFA. Be prepared to provide evidence to support your request. Furthermore, if you are considering buying a business, it's crucial to contact the CDTFA beforehand to check its sales and use tax standing. You will be responsible for any existing tax debts after the purchase is complete.
Getting third-party help with sales tax filing
While you can file directly with the CDTFA, manual filing is difficult, especially for larger businesses with many transactions across different districts. Outsourcing to experts like accountants, bookkeepers, or sales tax automation companies is common. They understand California sales tax law and can help you navigate its complexities.
Quaderno offers a service to simplify your sales tax compliance. Besides generating detailed tax reports with all necessary data, Quaderno can handle the filing process for you. By connecting to your sales data, Quaderno manages the submission of your sales tax returns to the CDTFA, ensuring timely and accurate filing. This saves time and provides peace of mind.
For further reading that will help you stay compliant and successful as a remote seller, check out our Business Guide to Sales Tax in California. Quaderno can help simplify the sales tax returns process by generating tax reports that provide all the necessary data to accurately fill out your forms.
Sales tax filing in other states
- Arizona Sales Tax Filing Guide
- Colorado Sales Tax Filing Guide
- Florida Sales Tax Filing Guide
- Georgia Sales Tax Filing Guide
- Illinois Sales Tax Filing Guide
- Massachusetts Sales Tax Filing Guide
- New Jersey Sales Tax Filing Guide
- New York Sales Tax Filing Guide
- North Carolina Sales Tax Filing Guide
- Pennsylvania Sales Tax Filing Guide
- Texas Sales Tax Filing Guide
- Virginia Sales Tax Filing Guide
- Washington Sales Tax Filing Guide
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.
