California Sales Tax 2026: Rates, Seller’s Permits, Resale Certificates and the 2027 Software Rule

What the 7.25% base rate hides, who needs a permit, how resale certificates protect a seller, the $500,000 test for remote sellers, and what changes when software and SaaS become taxable on January 1, 2027.

7.25%. That is the sales tax rate California sets for the whole state, and in most of the state it is only the starting point. Cities and counties add voter-approved district taxes on top, so a sale in one street can carry a different rate from the same sale a mile away. From October 1, 2026, the combined rate in the City of Los Angeles rises to 10.25%, and the highest in the state, in Lancaster and Palmdale, reaches 11.75%.

The rate is the part most people search for. It is rarely the part that causes trouble. A business selling into California has to answer three other questions first: whether it is required to register at all, which registration it needs, and on which sales it must collect. Those answers turn on a $500,000 sales test for sellers outside the state and on a seller’s permit that costs nothing to obtain but carries criminal penalties if you trade without one. They also turn on resale certificates, which move the tax off a sale only if they were taken in the right form and in good faith.

One further change arrives on January 1, 2027. Senate Bill 122, signed on June 29, 2026, brings digital products into the definition of tangible personal property. Prewritten software becomes taxable whether it ships on a disc, downloads, or runs in a browser. For the first time, SaaS subscriptions sold to California customers carry sales tax. This guide sets out how the system works today, what each kind of seller has to do, and where the 2027 rule changes the answer.

01 · Snapshot: California sales tax at a glance

Every figure here is restated, with its source, in the section that deals with it.

02 · 60-second self-check

Six questions. A yes to any of them sends you to the track that deals with it.

03 · Track 1: Sellers based in another US state

Written for the tax or finance lead at a US company outside California that ships goods to California customers.

3.1 The $500,000 test

Before the Supreme Court’s 2018 decision in South Dakota v. Wayfair, a state could require an out-of-state seller to collect its tax only if the seller had a physical presence there. California’s response to Wayfair took effect on April 1, 2019. The rule sits in section 6203(c)(4) of the Revenue and Taxation Code. It treats a retailer as engaged in business in the state when its total combined sales of tangible personal property for delivery in California, counting all persons related to it, exceed $500,000 in the preceding or the current calendar year.

Three features of that test catch sellers out. It counts related persons, as defined by section 267(b) of the Internal Revenue Code, so a group cannot split its California sales across subsidiaries to stay under the line. It counts sales made through marketplaces: CDTFA’s guidance on the Marketplace Facilitator Act says a retailer must include sales facilitated through a marketplace facilitator’s marketplace when measuring the threshold, even though the marketplace collects the tax on those sales. And unlike many states, California has no transaction-count test. Two hundred small orders do not create an obligation; $500,001 of deliveries does.

The test looks at the preceding or the current calendar year. A seller that crosses the line partway through the year must register and begin collecting from that day: CDTFA’s own worked example has a retailer passing $500,000 on July 7 and required to register on July 7. A seller that crossed it last year remains engaged in business throughout this year even if this year’s sales fall.

3.2 Physical presence, which needs no threshold

The $500,000 test is an addition to the older rule, not a replacement. CDTFA’s guidance for out-of-state retailers lists the presences that make a retailer engaged in business in California regardless of sales: maintaining, occupying or using an office, place of distribution, sales or sample room, warehouse or storage place, directly or through a subsidiary or agent; representatives, agents or independent contractors operating in the state on the retailer’s behalf; and property located in California, which CDTFA says includes machinery, equipment, furniture and computer servers.

Inventory is the presence most often overlooked. CDTFA states that a retailer with no place of business in California that keeps commingled inventory at a third-party California fulfillment center or warehouse would generally be regarded as engaged in business in the state. A seller that uses a fulfillment network does not always control, or know, which warehouses hold its stock.

Trade shows are the narrow exception. The test has two limbs: no more than 15 days of convention and trade show activity in California in any 12-month period, and no more than $100,000 of net income from those activities in the prior calendar year. A retailer within both is not required to register on that basis alone. Sales made at the show remain taxable.

3.3 Which registration, and what it obliges you to collect

An out-of-state retailer with no place of business in California registers for a Certificate of Registration – Use Tax, not a seller’s permit. The distinction matters in practice: the obligation is to collect California use tax from the customer and remit it, rather than to pay sales tax as a California retailer does. The rate is the same.

Crossing the statewide threshold has a second effect that is easy to miss. CDTFA’s guidance says that a retailer meeting the $500,000 test is also considered engaged in business in all districts that impose a district tax, and must collect district use tax at the rate of the delivery address. Below the threshold, a retailer collects district tax only where it has a physical presence. A remote seller over the line therefore charges the full local rate, 10.25% for a Los Angeles address from October 1, 2026, not the 7.25% base.

3.4 If you should already have been collecting: voluntary disclosure

Where no return was filed, CDTFA has eight years to assess. California’s Out-of-State Voluntary Disclosure Program shortens that. Under section 6487.05, a qualifying retailer’s exposure is limited to three years, and penalties are relieved where the failure was due to reasonable cause, supported by a statement under penalty of perjury. Interest remains due.

The conditions are strict. The retailer must be located outside California and not previously registered, must be engaged in business in the state under section 6203, must register voluntarily, and must not have been contacted by CDTFA about its obligations. The failure must not be the result of negligence, intentional disregard of the law or fraud. Timing decides most cases, because once CDTFA makes contact the route closes. Publication 178 allows a seller or its representative to request a written opinion on eligibility without disclosing the seller’s identity; the application itself is made on form CDTFA-38.

Tax that was collected from customers and never remitted is a different and more serious problem: section 6597 imposes a 40% penalty on a person who knowingly collects tax reimbursement and fails to remit it. Before any registration, a sales tax exposure analysis sizes the liability by year, and a nexus assessment establishes where else the same facts have created obligations.

04 · Track 2: Sellers based outside the United States

A non-US brand selling direct to California consumers, worked through one fictional company. Read this if you are its founder or finance director.

California’s statute makes no distinction by country. Section 6203(c)(4) applies to any retailer whose California deliveries exceed the threshold, and CDTFA’s registration guidance is written for retailers outside the state without limiting that to other US states. A foreign seller’s position is therefore the same as a Texan seller’s, with two practical differences: the seller usually has no US tax identity to start from, and it is more likely to be selling through a mix of its own store and a marketplace.

4.1 Worked example: Mokpo Harbor Cosmetics Co., Ltd.

Mokpo Harbor Cosmetics is a skincare brand established in South Korea. It ships from a warehouse near Incheon by international courier and has no premises, staff or stock in the United States. In calendar year 2025 its own web store, built on Shopify, delivered $380,000 of products to California addresses. A US marketplace sold a further $190,000 of its products to California customers.

Take a single order. On October 15, 2026, a customer in Santa Monica buys a $120 serum set from the web store. Santa Monica’s rate rises from 10.75% to 11.25% on October 1, 2026, so the correct tax is $13.50, not the $8.70 that the 7.25% base would produce. The company adds a separately stated courier charge of $9.00, which is exactly what the courier bills it. Under CDTFA Publication 100, a delivery charge is not taxable when the goods ship directly to the buyer by common carrier, contract carrier or US Mail, the charge is separately stated, and it is not greater than the actual cost of delivery. Had the company charged $12.00 for the same $9.00 delivery, the $3.00 excess would be taxable.

Two changes would alter the picture. If Mokpo Harbor moved stock into a California fulfillment center to shorten delivery times, the inventory would give it a physical presence in the state independently of the sales test. And if it launched a paid companion app that analyzes a customer’s skin from a photograph, that app would be prewritten software sold to California customers, and from January 1, 2027, a taxable digital product under Senate Bill 122 (see Track 3). Had the company crossed the threshold in 2024 without registering, it would be a candidate for the voluntary disclosure route in section 3.4, provided CDTFA had not yet contacted it.

US customs duties and California sales tax are separate charges administered by separate governments; paying one does not discharge the other. For a store running on Shopify, our Shopify integration applies the delivery-address rate at checkout rather than a single state rate.

05 · Track 3: E-commerce, marketplaces and software

For operators: marketplace sellers, platform builders and anyone selling software, apps or SaaS into California.

5.1 Marketplaces

Since October 1, 2019, California’s Marketplace Facilitator Act, sections 6040 to 6049.5 of the Revenue and Taxation Code, has made a registered marketplace facilitator the retailer selling or making the sale of goods sold through its marketplace. The facilitator’s own threshold is $500,000, measured across its own sales and the sales it facilitates.

For a seller on a marketplace, the consequence is divided. The marketplace collects and remits tax on the sales it facilitates. The seller remains responsible for everything it sells through any other channel, and, as Track 1 explains, the marketplace sales still count toward the seller’s own $500,000 test.

5.2 Software and SaaS today

Until December 31, 2026, California taxes prewritten software only when it arrives on a physical medium. Regulation 1502 provides that the sale of a prewritten program is not a taxable transaction if it is transferred by remote telecommunications and the buyer obtains no tangible storage media. Remotely accessed software is outside the tax too: the Legislative Analyst’s Office summarized current law in May 2026 as not extending to custom software, prewritten downloaded software, or prewritten software accessed remotely.

5.3 Senate Bill 122: digital products from January 1, 2027

Senate Bill 122, a budget trailer bill from the Senate Committee on Budget and Fiscal Review, was signed on June 29, 2026 as Chapter 23 of the Statutes of 2026. From January 1, 2027, it expands the definition of tangible personal property to include digital products. CDTFA defines a digital product as prewritten computer software transferred on tangible storage media, transferred electronically, or accessed remotely. Accessed remotely covers software that resides on the vendor’s server or a third party’s server and is used for consideration by means of a code, password or similar. That is the ordinary shape of a SaaS subscription.

The definition has deliberate limits. According to CDTFA’s Special Notice L-1036, the following are not digital products: digital assets such as cryptocurrency; digital audio works, including music and ringtones; digital audiovisual works; digital books; digital infrastructure, meaning cloud platforms on which customers create, deploy or run their own software; digital video game products; and digital visual works. Custom software remains outside the tax. The practical consequence is that a company selling a prewritten business application, whether installed or used in a browser, is now in scope, while a company selling cloud compute on which the customer runs its own code is not.

Two further provisions matter for larger vendors. First, where a retailer’s electronic or remote-access sales of digital products to a single purchaser exceed $5 million in calendar year 2027, the liability shifts to the purchaser, who pays use tax directly under a Use Tax Direct Payment Permit; from January 1, 2028, that test looks at the current or preceding calendar year. Second, CDTFA’s notice is explicit that digital product sellers in California that are not already registered must register for a seller’s permit. Many software companies have never held one.

The Legislative Analyst’s Office estimated $900 million a year for the General Fund and $1.1 billion in local sales tax revenue once the tax is in full effect. CDTFA’s rulemaking calendar shows amendments to Regulations 1502 and 1507 and a new Regulation 1507.1 to implement the change; until they are adopted, the text of Regulation 1502 still describes the pre-2027 rule. Sellers of software into several states will find California’s treatment compared with other states’ in our state-by-state SaaS guide.

06 · Track 4: Businesses based in California

Permits, certificates and returns, seen from the desk of the owner or in-house accountant of a California business.

6.1 The seller’s permit

You need a seller’s permit if you are engaged in business in California and intend to sell or lease tangible personal property that would ordinarily be subject to sales tax if sold at retail. Section 6066 requires an application for each place of business, so a company with three shops holds three permits. The permit is sometimes called a resale number or resale permit; CDTFA’s Publication 107 notes that those names are incorrect.

There is no charge for a seller’s permit. CDTFA may require a security deposit, for example where the law mandates one, where a permit has been revoked, or where the applicant has a history of non-payment. Registration is online, and CDTFA says it may be able to issue your permit the same day, which is a possibility rather than a promise. Expect to supply identification numbers (Social Security, driver license, federal employer identification), entity and officer details, bank details and the name of the person who keeps your books. Temporary permits are available for short selling operations at one location with no permanent place of business.

Trading without a permit is a crime, not merely an administrative lapse. Under section 6071, a person who engages in business as a seller without a permit, and each officer of a corporation that does so, is guilty of a misdemeanor. Section 7153 sets the punishment at a fine of $1,000 to $5,000, imprisonment in the county jail for up to one year, or both. Separately, Publication 75 notes that a 50% penalty may apply where CDTFA determines a business knowingly did not obtain a valid permit in order to evade the tax. If your registration is still outstanding, our sales tax registration service handles the CDTFA application.

6.2 Resale certificates

A seller’s permit and a resale certificate are different instruments held by different people. The permit is issued by CDTFA to the seller. The resale certificate is issued by the buyer to the seller, to show that goods are bought for resale and so should not carry tax. CDTFA does not issue resale certificates; as Publication 103 puts it, a purchaser may download form CDTFA-230, the California Resale Certificate, and complete it.

A certificate does not have to be on that form, but it must contain the five things set out in Regulation 1668. Three identify the buyer: its signature or that of an employee or authorized representative, its name and address, and the number of the seller’s permit it holds, or an explanation of why it does not need one. The fourth is a statement that the property is purchased for resale, which must contain the phrase “for resale”. The fifth is the date. Wording such as “non-taxable” or “exempt” does not satisfy the regulation. An otherwise valid certificate is not invalid merely because it is undated.

Three rules govern how long a certificate protects you and when. It remains in effect until revoked in writing, so there is no expiry date. It relieves the seller of liability only if it was taken in good faith from a person engaged in the business of selling tangible personal property, the condition set by section 6092. And it must be timely: taken before the seller bills the purchaser, within the seller’s normal billing and payment cycle, or at or before delivery. A certificate obtained after an auditor asks for it does not meet that condition.

Good faith is easier to show when the buyer’s permit has been checked. CDTFA offers two ways to confirm that a customer holds a valid seller’s permit: the Verify a Permit, License, or Account service online, and an automated toll-free line at 1-888-225-5263. At volume this needs a system: our certificate management service collects, stores and tracks resale and exemption certificates by customer. For the broader exemption rules, see our California sales tax exemption guide.

6.3 Exemption certificates and the manufacturing partial exemption

The most valuable exemption for many California businesses is partial. Qualifying manufacturers and research and development businesses, broadly those primarily engaged in NAICS codes 3111 to 3399, 541711 or 541712 and certain electricity-generation codes, can buy qualifying equipment at a reduced rate. CDTFA states that such purchases are taxed at a rate of 3.3125 percent, the 7.25% statewide rate less the 3.9375% partial exemption, plus any applicable district taxes. The buyer gives the seller form CDTFA-230-M, which states that the 3.9375% partial exemption runs to June 30, 2030.

6.4 Use tax on your own purchases

When a business buys goods from a seller that does not charge California tax and uses them in the state, it owes use tax at the same rate. A business that holds a seller’s permit must pay the use tax due on business related purchases on its sales and use tax return. It cannot use the income tax return to report it; that route, with its lookup table, is for purchasers with no seller’s permit or consumer use tax account, and only for items under $1,000 each.

6.5 Returns, deadlines and penalties

CDTFA assigns a filing frequency, whether quarterly prepay, quarterly, monthly, fiscal yearly or yearly, based on reported tax or expected taxable sales at registration. Returns and payment are due on the last day of the month after the period: a quarter ending June 30 is due on July 31. A due date that falls on a weekend or state holiday moves to the next business day.

The penalties are 10% of the tax for a late return and 10% for a late payment, limited to 10% in total for any one return, plus interest. A deficiency arising from fraud or intent to evade carries a 25% penalty. CDTFA generally has three years from the later of the return’s filing or the end of the month following the quarter to issue a deficiency determination; where no return was filed, the period is eight years. A business filing in several states typically outsources the calendar: our sales tax filing service prepares and files the CDTFA return alongside the others.

A California-based retailer that should have held a permit, or collected more than it did, has fewer options than a remote seller. California’s voluntary disclosure programs are built for out-of-state retailers and for in-state purchasers who owe use tax on their own purchases; neither covers an in-state retailer. For that business the path is to register and file, with penalty relief under section 6592 available where the failure was due to reasonable cause and circumstances beyond its control. Interest is not relieved.

6.6 Selling the business: the tax clearance

A buyer of a California business with a seller’s permit inherits exposure unless it protects itself. Under section 6811, the purchaser must withhold enough of the price to cover the seller’s unpaid tax until the seller produces a receipt or a certificate stating that nothing is due. A purchaser that fails to withhold becomes personally liable up to the purchase price. The request is made through CDTFA’s online services under Request a Tax and Fee Clearance, or in writing to a CDTFA office, with the purchase agreement, escrow details and the date of the sale; CDTFA must respond within 60 days of the relevant date.

07 · Cross-track essentials: how the rate is built

7.1 What makes up 7.25%

CDTFA’s rate breakdown divides the statewide base into a 6.00% state portion and a 1.25% local portion. Much of the state portion is passed to local funds for public safety and health and social services, and of the local 1.25%, 1.00% funds city or county operations and 0.25% county transportation. The rate has stood at 7.25% since January 1, 2017, when it fell from 7.50%.

7.2 District taxes

On top of the base, cities and counties levy district taxes approved by their voters. They are why the combined rate varies from one address to the next, and they change more often than the base: CDTFA’s notice of rates effective October 1, 2026 lists increases in Los Angeles County, where Measure ER adds a 0.50% countywide tax, as well as in Perris and Red Bluff. After that date, Lancaster and Palmdale stand at 11.75%, Santa Fe Springs at 11.50%, and Santa Monica, Culver City, Compton and South Gate at 11.25%.

7.3 Why a ZIP code gives the wrong answer

CDTFA’s own answer to whether ZIP codes can determine the rate is “No, it is not always possible”. Postal addresses sometimes carry the name of a city other than the one the address is in, and ZIP code areas cross city and district boundaries. The reliable method is an address lookup in CDTFA’s Find a Sales and Use Tax Rate tool, which returns the rate for the point it maps. Our US sales tax calculator gives a quick estimate; for a filing position, confirm the delivery address in CDTFA’s tool.

7.4 Groceries, vehicles and consumers’ use tax

Under Regulation 1602, tax does not apply to sales of food products for human consumption, subject to exceptions for items such as hot prepared food and meals. A vehicle bought out of state or from a private party attracts use tax, which is normally paid to the DMV at registration at the rate for the address where the vehicle is registered. Individuals who bought untaxed goods online or abroad may report use tax on their state income tax return, as the Franchise Tax Board explains.

08 · Recent changes and the road ahead

January 1, 2017: base rate falls to 7.25%

The statewide rate fell from 7.50% to 7.25%, where it has remained.

April 1, 2019, and October 1, 2019: remote sellers and marketplaces

Assembly Bill 147 introduced the $500,000 delivery test and applied it statewide to district taxes. From October 1, 2019, marketplace facilitators became the retailer for the sales they facilitate.

April 1, 2025: Los Angeles County Measure A

Measure A replaced the 0.25% Measure H tax with a 0.50% countywide tax, taking the City of Los Angeles from 9.50% to 9.75%.

June 29, 2026: Senate Bill 122 signed

The budget trailer bill brought digital products, including SaaS, into the sales and use tax base from January 1, 2027.

October 1, 2026: new district rates

Measure ER adds 0.50% across Los Angeles County; the highest combined rate in the state becomes 11.75%. CDTFA’s Special Notice L-1037 lists every change.

January 1, 2027: digital products taxable

Prewritten software and SaaS sold to California customers become taxable. Sellers not yet registered must obtain a seller’s permit. Purchases above $5 million from one retailer in 2027 shift to purchaser-paid use tax.

June 30, 2030: manufacturing partial exemption ends

The 3.9375% partial exemption for manufacturing and research equipment is scheduled to expire unless extended.

How TaxDo handles California sales tax, from A to Z

California is one of 45 states with a statewide sales tax, and a seller that owes it here usually owes it elsewhere too. TaxDo combines a specialized sales tax team with an automated compliance platform, and covers the whole cycle in every state in four steps, in this order, because each one needs the one before it.

Step 1 · Monitor exposure. The platform tracks your sales into each state against that state’s own test, counting marketplace and related-company sales, and flags a threshold before you cross it. A nexus assessment sets the starting position.

Step 2 · Resolve the past, then register. Where a threshold was crossed in an earlier year, we quantify the exposure by year and negotiate a voluntary disclosure agreement with each state, in California through CDTFA’s Out-of-State Voluntary Disclosure Program where the seller qualifies. We then obtain the right registration: a seller’s permit or a Certificate of Registration – Use Tax.

Step 3 · Automate collection and certificates. Use the platform on its own or connect it to your accounting system, ERP, sales platform or e-commerce channel, and it calculates sales tax live at the delivery-address rate in every state. Certificate management is automated too: resale and exemption certificates are collected, stored and tracked by customer.

Step 4 · File, and defend. We prepare and file the CDTFA return on the frequency CDTFA assigns, and every other state’s return alongside it. If a state opens an audit, our team handles it on your behalf, from records to resolution.

One specialized team and one platform, from registration to audit, in every state you sell into. For the national picture, see our US sales tax guide for 2026 and the state-by-state hub.