California’s Sales Tax Rate Increase Becomes Effective January 2013

California’s sales and use tax rate will increase by 0.25%, from 7.25% to 7.5%, effective January 1, 2013, due to voter approval of Proposition 30. The increased tax rate is applicable from January 1, 2013 through December 31, 2016. Voters in some California cities and counties also approved new or increased district taxes that will go into effect April 1, 2013. If a retailer incorrectly collects sales or use tax at the previous lower rate after January 1, 2013, the retailer will still owe the 0.25% difference. If a customer purchased merchandise before January 1, 2013, but returns it after that date, the retailer should refund tax based on the rate that was in effect at the time of the sale. The 0.25% rate increase will apply to all taxable sales and purchases made as part of fixed-price contracts and fixed-price lease agreements that were entered into before January 1, 2013. The increased rate will replace the rate that was in effect at the time the fixed-price contract or lease agreement was entered into. The sales and use tax rate increase does not apply to sales of motor vehicle fuel, but the rate increase does apply to sales of diesel fuel. Effective January, 1, 2013, the sales and use tax rate for diesel fuel is increased to 9.67% plus applicable district taxes. The increased rate for diesel fuel will be in effect through June 30, 2013. (Sales and Use Tax Rate: Increases January 1, 2013, California State Board of Equalization, November 2012; Special Notice L-344, California State Board of Equalization, December 2012)

Posted on January 28, 2013