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12 <br /> <br />SALES AND USE TAXES <br />Consumers are familiar with the experience of going to a store, <br />buying something and having an amount added for sales tax. <br />Services are generally exempt from the sales tax as well as certain <br />items, like most groceries and medicine. The sales tax is assessed <br />as a percentage of the amount purchased. <br />The “base” statewide sales tax rate of 7.25 percent includes <br />amounts to: <br />• The state general fund (3.9375 percent),v <br />• County realignment programs (state health/ welfare and <br />corrections / law enforcement programs shifted from the <br />state, 1.5625 percent), <br />• Supplemental local law enforcement grants (0.50 percent),vi <br />• Transportation programs in the county where the transaction <br />occurs (0.25 percent), and <br />• The city where the transaction occurs (1.00 percent).vii If the <br />transaction occurs in an unincorporated area, the 1.00 percent <br />amount goes to the county. <br /> <br />Cities, counties and countywide transportation agencies may impose <br />sales tax rates to be added on to the “base” statewide sales and use <br />tax rate. The add-on rates are actually “transactions and use taxes” and <br />are allocated to the jurisdiction where the taxed product is received or <br />registered (as in the case of a motor vehicle purchase). Over 120 cities <br />have enacted transaction and use taxes of up to one percent, most <br />commonly with majority voter approval for general purposes. Many <br />counties and county transportation agencies have enacted rates, most <br />commonly with two-thirds vote for specific purposes. Under current <br />state law, the maximum combination of transactions and use tax rates <br />in any location may not exceed two percent.viii <br />State Sales and Use <br />Tax Administration <br />The State Board of <br />Equalization collects local <br />sales and use tax revenues <br />from the retailer and sends <br />revenue from local rates and <br />allocations back to cities and <br />counties. In addition to <br />administering the sales and <br />use tax system, the State <br />Board of Equalization collects <br />and allocates other state <br />taxes including fuel, tobacco <br />and alcohol taxes. <br />The “Use Tax” Part of <br />the Sales and Use Tax <br />California’s sales tax has a <br />relative called the “use tax.” <br />While the sales tax is <br />imposed on the seller, the use <br />tax is imposed on the <br />purchaser and at the same <br />rate as the sales tax. The <br />most common example of use <br />tax is for the purchase of <br />goods from an out-of-state <br />retailer for use in California. <br />Out-of-state retailers doing <br />business in California are <br />required to report to the State <br />Board of Equalization the <br />jurisdiction to which sold <br />items are delivered. If the <br />retailer has a physical <br />presence (nexus) in <br />California, they must collect <br />use tax when goods are <br />delivered to purchasers in this <br />state. If the seller does not <br />collect and remit the use tax, <br />the purchaser is legally <br />obligated to report and pay. <br />Page 30 of 109