As of July 1, 2004, the state sales and use tax rate increases from 6% to 6.25%. However, as part of this approved rate increase, voters also approved a decrease in the local tax rates, therefore leaving the unchanged combined rate of 7.25%. State tax returns and local tax schedules will remain unchanged; changes will only be noticeable if you have sales or purchases that qualify for a partial exemption from sales and use tax. The exemptions include the following: 1) rural investment tax, 2) teleproduction or other post production services, 3) farm equipment and machinery, 4) diesel fuel used in farming activities or food processing, 5) timber harvesting equipment and machinery, and 6) racehorse breeding stock. Therefore, beginning July 1, 2004, the partial tax exemptions will increase from 5% to 5.25%. For our previous news item on this topic, click here. (Tax Information Bulletin, California State Board of Equalization, June 2004.)