California charges sales tax on most goods and some services, and the rate depends on where you buy

California's statewide sales tax rate is 7.25%, but the total tax you pay at checkout is almost always higher because counties and cities add their own taxes on top. The combined rate in your area ranges from 7.25% to over 10%, depending on your location. Sales tax is collected by the seller at the point of sale — you do not file it yourself on a tax return the way you do with income tax.

The tax applies to tangible goods (things you can touch) like clothing, groceries, electronics, and furniture. It also applies to some services, though fewer than you might expect. Certain items are exempt — food you buy at a grocery store to cook at home is not taxed, but the same food at a restaurant is. Understanding what is and is not taxed matters because it affects your actual cost and, if you run a business, what you owe to the state.

Key Takeaways

  • California's base sales tax is 7.25%, but your actual rate includes county and city taxes and ranges from 7.25% to over 10% depending on where you live.
  • Sales tax applies to most goods and some services, but groceries, prescription medications, and medical equipment are generally exempt.
  • Restaurant meals, prepared foods, and takeout are taxed, even though raw groceries are not.
  • If you run a business, you must register with the California Department of Tax and Fee Administration and collect sales tax from customers, then send it to the state monthly or quarterly.

How the combined sales tax rate is built

The 7.25% statewide rate is made up of a 6% state tax plus a 1.25% county tax. On top of that, your city or district may add a local tax of 0.5% to 2.5% or more. This means a city in a high-tax county can easily reach 9% or 10%. You can find your exact local rate by entering your zip code on the California Department of Tax and Fee Administration website, or by asking a cashier.

The rate you pay is determined by where the sale happens, not where you live. If you buy something in San Francisco, you pay San Francisco's rate. If you buy the same item in a neighboring city, you pay that city's rate. Online purchases are trickier — California requires most online retailers to collect sales tax based on the delivery address, so you pay the rate for where the item is being shipped.

What is taxed and what is not

Groceries bought at a supermarket to cook at home are not taxed. This includes bread, milk, vegetables, meat, and canned goods. However, hot prepared foods, deli items kept warm, and anything you eat in the store or take out to eat when ready are taxed. A cold sandwich from a grocery store deli is not taxed; a hot rotisserie chicken is.

Prescription medications and certain medical equipment are exempt. Over-the-counter medications like aspirin or cold medicine are taxed. Clothing and shoes are generally taxed, though there are rare exceptions for items under a certain price in some states — California does not have a clothing exemption. Books, newspapers, and magazines are taxed. Gasoline is taxed, as are utilities like electricity and natural gas.

Services are taxed less often than goods. Haircuts, dry cleaning, and repairs are taxed. Medical services, dental work, and therapy are not. Legal services are not taxed. Labor charges on repairs can be taxed or not depending on the type of repair — this is where the rules get complicated and businesses often disagree with the state.

What happens when you buy online or out of state

If you buy from an online retailer that has a physical presence in California (a warehouse, office, or store), that retailer must collect California sales tax. Most large retailers like Amazon, Walmart, and Target do this. The tax is calculated based on your delivery address, so you pay your local rate.

If you buy from a small out-of-state retailer with no California presence, they are not required to collect California sales tax at checkout. However, California law says you owe "use tax" on that purchase — it is the same rate as sales tax, and you are supposed to report it on your state income tax return. Almost no individual does this, and the state does not actively pursue it for small purchases. Businesses, however, are expected to track and pay use tax on business purchases from out-of-state vendors.

If you own a business and must collect sales tax

Any business that sells taxable goods or services in California must register with the California Department of Tax and Fee Administration before making sales. You get a seller's permit, which is free. Once registered, you collect sales tax from customers and send it to the state on a schedule determined by how much you sell — usually monthly or quarterly.

You do not pay sales tax on inventory you buy to resell. When you buy goods wholesale to sell in your store, you provide your seller's permit to the wholesaler and do not pay tax. You only collect tax when you sell to the final customer. If you buy supplies for your business (office furniture, equipment), you do pay sales tax on those purchases because they are not inventory for resale.

The state requires you to keep records of all sales and taxes collected. If you are audited, you need to show what you sold, to whom, and what tax you collected. Many businesses use point-of-sale systems that track this automatically. If you fall behind on sending in sales tax, the state charges penalties and interest, and can revoke your seller's permit.

Special situations and exemptions

Nonprofit organizations can sometimes get an exemption from sales tax on purchases, but they must have a resale certificate or exemption certificate from the state. A nonprofit that buys office supplies still pays tax unless it has filed for exemption. Religious organizations have limited exemptions — they can buy items used directly in worship without tax, but not general office supplies.

Farmers selling produce directly to consumers at a farmers market do not always have to collect sales tax, depending on the type of produce and the structure of the sale. This is one area where the rules vary significantly, and farmers should check with the state before assuming they are exempt.

If you return an item and get a refund, the sales tax is refunded too. If you exchange an item for a different one, you pay tax on the difference if the new item costs more. If it costs less, you get a refund of the difference including tax.

Frequently Asked Questions

Is sales tax included in the price shown on the shelf?

No. Prices shown in California stores are before tax. The sales tax is added at checkout. This is different from some countries where the displayed price includes all taxes.

Do I have to pay sales tax on used items?

Yes, if you buy a used item from a business (a used car lot, consignment store, or pawn shop), sales tax applies. If you buy from an individual in a private sale, sales tax does not explore. The difference is whether the seller is a registered business.

What about sales tax on services like haircuts or car repairs?

Haircuts, dry cleaning, and most repairs are taxed in California. The tax applies to the labor and materials together. Some services like medical care and legal information are not taxed.

Can I deduct sales tax I paid on my state income tax return?

California does not allow a deduction for sales tax paid. You can only deduct sales tax if you itemize deductions on your federal return, and only if you choose the state and local tax deduction instead of the standard deduction — but this is a federal rule, not a California one.

What if a business does not charge me sales tax when they should?

That is the business's problem, not yours. You are not responsible if a seller fails to collect tax. The state pursues the business for the unpaid tax. However, if you are the business owner and you do not collect tax, you are liable to the state for the full amount plus penalties.