Hike in District Sales and Use Tax Rates in California to Take Effect on July 1, 2009

The California State Board of Equalization (“BOE”) has issued a release stating that a number of voter-approved sales and use tax increases – designed to provide revenue for local purposes – will take effect July 1, 2009.

The increases, approved by voters locally in the November 2008 election, will fund programs at the city or county level. Some tax increases apply to cities, some apply to entire counties, and some replace current taxes, the BOE said.

In Los Angeles County, voters approved the Los Angeles County Metropolitan Transportation Authority sales and use tax increase of .50% in November 2008with an effective date of July 1, 2009. This .50% increase will apply to all cities and unincorporated areas within Los Angeles County. There are several cities within Los Angeles County that also have a previously approved add-on local tax.

According to the BOE, those cities, such as the Cities of Pico Rivera and South Gate, will have a sales tax rate higher than that of the cities or unincorporated areas within Los Angeles County that have no add-on taxes. The Los Angeles County base rate will be 9.75% beginning July 1, 2009. The cities of Pico Rivera and Southgate will have a tax rate of 10.75%, the highest rate in California.

The BOE added that beginning July 1, the sales and use tax rates in California range from 8.25% to 10.75%. The Orange County city of Laguna Beach will discontinue the add-on rate of .50% causing a decrease in the Laguna Beach sales tax rate to 8.75%. The discontinued rate of .50% in Laguna Beach was originallyapproved by voters as the City of Laguna Beach Temporary Transaction and Use Tax. On March 10, 2009, the Laguna Beach city council voted to end the tax.

The BOE explained that retailers generally need to apply the new tax rates if they:

•Operate within the taxing area (the City or County with the new tax rate) and have merchandise sold and delivered within that area.
•Have a business location in the area.
•Deliver into the area using their vehicles.
•Have an agent or representative in the area to make sales, deliveries, or take orders.
•Sell automobiles, boats, or aircraft to customers who register them in the area.
•Collect tax on lease payments from property used in the area.

If a retailer is not required to collect the additional tax as described above, the buyer may be liable for that tax.

The five-member California State BOE is a publicly elected tax board. It hears business tax appeals, acts as the appellate body for franchise and personal income tax appeals, and serves a significant role in the assessment and administration of property taxes.

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