Fixed Price Contracts Not Exempt From California 1% State Rate Increase

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)

Posted on April 23, 2009