Guide to the California Seller’s Permit and California Sales Tax

If you sell or lease physical goods (products) in California, you must get a seller’s permit from the California Department of Tax and Fee Administration (CDTFA), and you must collect sales tax from your customers. Sales tax was previously handled by the California Board of Equalization, so you may still see that agency referenced in other sources.

Here’s what you need to know about how to get a seller’s permit and collect sales tax.

How much does it cost to get a seller’s permit in California?

It’s free! You just need to make sure you collect the sales tax from your customers, and send the money to the government on your periodic filing date (usually annual, but may be quarterly or monthly, depending on sales).

How do I get a seller’s permit?

You can do this online at the CDTFA website.

Do I need to pay sales tax on products or materials I will resell to my customers?

Nope. This is generally called a “wholesale” purchase, and you do not need to pay the sales tax. To avoid the sales tax, you generally must present a resale certificate to the supplier/vendor. (See more on resale certificates below)

You do not need to pay the sales tax when:

  • purchasing finished items for resale
  • buying materials that will become a physical part of an item that will be held for resale
  • purchasing items solely for demonstration or display while holding them for sale in the regular course of business operations.

However, vendors may have their own policies as to whether they will allow you to not pay the sales tax. They may have a minimum order amount. If you do end up paying sales tax when you did not need to do so, you may deduct this amount from your sales tax return filing.

You must still pay sales tax when buying a product you will:

  • Use rather than sell
  • Use in your business before you sell it
  • Use for a personal purpose, or
  • Hold as an investment for appreciation in value and for sale in the future.

Is a resale certificate the same as a seller’s permit?

No. A seller’s permit allows you to sell or lease goods. A resale certificate is a form you fill out to give to vendors when you do not need to pay them sales tax (see above), which is the case when you will resell the items to your customers.

Is there tax on digital goods?

Digital goods or electronic data products such as software, data, digital books (eBooks), mobile applications (apps), and digital images or photos are generally not taxable when you transmit the data to your customer over the Internet. However, if as part of the sale, you provide your customer with a printed copy of the electronically transferred information or a backup data copy on a physical storage medium, such as a flash drive, the entire sale is usually taxable.

Do I need to collect tax from out-of-state customers?

It depends on the destination state. Many states now require online retailers to charge sales tax for all locations where the goods are shipped.1South Dakota v Wayfair However, these new requirements generally only apply to businesses that do a large amount of business (say $500,000 or so).

The previous rule was that you only needed to charge sales tax for purchases that are shipped to a state where you have any sort of “physical presence” such as a retail store, warehouse, office, or where the owners reside.2Quill CorpvNorth Dakota, 504 U.S. 298 (1992)

Further Resources

See our full Guide to the Law for Businesses in California

See our Guide to Business Taxes in California

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