California Sales Tax Glossary
Plain-English definitions of 10 key California sales tax terms — from CDTFA and Seller's Permit to nexus, district taxes, remittance, and QBO tax codes.
CDTFA (California Department of Tax and Fee Administration)
The California state agency that administers sales tax, use tax, and dozens of other taxes and fees. You register for your Seller's Permit through the CDTFA, file your sales tax returns with them, and remit what you collected. Website: cdtfa.ca.gov.
Seller's Permit
The registration required before you can make retail sales of taxable goods in California. Free to obtain from the CDTFA, you can apply online and typically receive it same-day. Required before your first taxable sale.
Use Tax
The obligation to pay California sales tax when you purchased taxable goods from a seller who did not collect California sales tax at the time of the sale. Same rate as sales tax. You pay it directly to the CDTFA (via your sales tax return if you're registered) rather than through the seller.
Economic Nexus
The threshold that requires out-of-state sellers to collect and remit California sales tax even without a physical presence in California. Currently: more than $500,000 in California sales in the current or previous calendar year. Once you cross this threshold, you must register with the CDTFA.
Taxable Sale
A sale of tangible personal property (a physical good) that is subject to California sales tax. The seller must collect the applicable rate from the buyer and remit it to the CDTFA. Most physical goods are taxable unless a specific exemption applies.
Exempt Sale
A sale that is not subject to California sales tax. Common examples: basic unprepared grocery food, prescription drugs, sales to government agencies, and sales where the buyer provides a valid resale certificate. You do not collect or remit sales tax on exempt sales, but you should keep documentation of the exemption.
Sales Tax Rate
The combined percentage charged on a taxable sale. California's base is 7.25% (6% state + 1.25% local base), but most areas also have district taxes that push the rate higher. The rate depends on the location of the sale, typically the ship-to address. Rates in California range from 7.25% to 10.75%+.
Remittance
The act of sending the sales tax you collected to the CDTFA. You collect tax from your customers, hold it as a liability, and remit the full amount to the CDTFA on your filing schedule (monthly, quarterly, or annually). Unlike Canada's GST/HST, there are no credits to offset, you remit every dollar you collected.
Tax Code (in QBO)
A label in QuickBooks Online that tells the system how to treat each transaction for sales tax purposes. Common codes: Taxable (sales tax applies at the rate for that location) and Non-Taxable (no sales tax). Setting the correct tax code on each product or service item is what allows QBO to calculate sales tax accurately on your invoices.
District Tax
An additional sales tax added on top of California's base rate by a city, county, or special district (e.g., transportation, transit, or public safety districts). District taxes are why the rate varies by location, a customer in San Francisco pays a different combined rate than a customer in a rural county. QBO's address-based calculation accounts for district taxes automatically.