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Q.When should I collect sales tax?
A.If you are in the business of selling merchandise, you are required to collect Sales Tax from your customers. In California, the State Board of Equalization is in charge of the policies and collection of Sales Tax. After you have registered your business with the State Board of Equalization, you will receive either monthly or quarterly tax report forms from them, which you must complete and return with the appropriate amount of sales tax collected on time.
Registering with the State Board of Equalization requires completion of an application. To complete the application you will need the following: (1) driver's license; (2) social security number; (3) name and contact information for each applicant; and (4) Details about your business and its ownership.
Retail Store Owners. Sometimes the rules about when you are supposed to collect Sales Tax are rather unclear, but as a general rule you must collect California Sales Tax, for all sales within California-- that is where where both you (the owner) and your customer (the purchaser) are in California. If you as the owner ship merchandise to a location outside the state of California, then typically you would not be required to collect Sales Tax.
Food Service and Restaurants. Different food items are taxed differently. The best way to know whether a specific food item is taxable or not, is to refer to the State Board of Equalization's instructions.
Service Companies. The labor fee charged by doctors, lawyers, accountants, consultants, couriers, and other service companies are NOT subject to Sales Tax. However, where a business sells both parts (merchandize) and labor (service), then you must charge sales tax on the portion related to the price charge for the parts.
IRS Circular 230 Disclosure: As required by U.S. Treasury Regulations, you are hereby advised that any written tax advice contained on this web site is not written or intended to be used (and cannot be used) by any taxpayer for the purpose of avoiding penalties that may be imposed on a taxpayer under the U.S. Internal Revenue Service.
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