California has issued a supplemental special notice informing taxpayers that fixed price contracts and lease agreements are not exempt from the 1% increase. This is true even if they were entered into before the April 1, 2009 effective date. So, if you incorrectly collected sales or use tax based on a lower rate, you will still owe the additional 1% tax. However, fixed price contracts and lease agreements entered into prior to the starting date of a new district tax are exempt from the district tax increase. (Supplement to Special Notices: New Tax rates to Take Effect April 1, 2009, and Sales and Use Tax Rate Increases on April 1, 2009 California State Board of Equalization, April 2009)