California is one of the nation’s most populous states and one of the most important economic engines in the country, but it has a lot of growing pains. That’s why Peak Reliance is here to help you prepare for what lies ahead with the sales tax landscape in the Golden State in 2023. Peak Reliance is a reliable team of professionally seasoned accountants. Keep reading to get an overview of the current sales tax landscape, as well as a glimpse into what type of changes could be coming your way soon. 

What Is Sales Tax? 

If you’ve ever purchased something in California, you’ve undoubtedly paid some state sales tax. You may even have paid it twice: State sales tax is an excise tax that’s levied on the sale of goods and services. In other words, you pay it to the retailer, not the government.  

How Is Sales Tax Collected in California? 

The vast majority of states that collect sales tax use a “use tax” system, which means that the seller is responsible for collecting it and sending it to the state. In California, however, the retailer collects the tax, but they pass the cost on to the customer by charging them tax at the register. California has a “franchise tax” system, which means that the state is responsible for collecting sales tax and remitting it to the state. This is different from having “merchant-only” tax, as in other states, where the retailer does not send tax to the state. 

The Current Sales Tax Rate in California 

The California state sales tax rate is currently 7.5%. The change to this rate took effect in January 2018, when California raised its sales tax rate from 5.5% to 7.5% to “comply with a voter-approved constitutional amendment.” 

Changes to the Sales Tax Base and Rates Likely in California by 2023 

While the state sales tax rate will remain at 7.5% in California in 2023, there are a number of other factors that could change how California sales tax works in the future. In this section, we’ll explore what could change in the sales tax landscape of California in 2023, as well as how likely it is that each of these changes will occur. 

California Sales Tax Base: The sales tax base in California could expand. Currently, California only taxes certain goods, like groceries and prescriptions, and services. If California adopts a system similar to Tennessee’s, which taxes all goods, California sales tax could expand to include many more goods and services. Again, it’s unlikely to happen, but it’s something to keep an eye out for.  

California Sales Tax Rate: The current state sales tax rate in California is 7.5%. The state is unlikely to lower this rate, but it is possible that the state could increase the rate. Again, it’s unlikely and we don’t expect it to happen, but it’s worth keeping an eye out for.  

California Revenue: The adjusted gross income (AGI) threshold for California sales tax is currently $211,000. In 2023, it’s likely that California will lower the threshold, meaning that more taxpayers will be subject to sales tax. 

Other Factors: In addition to the factors listed above, there are a number of other factors that could change the sales tax landscape of California in 2023. For example, it’s possible that California will adopt a “use tax” system, which would mean that the seller would collect the tax and send it to the state. It’s also possible that California will adopt a “merchant-only” tax system, where the retailer does not have to send sales tax to the state, but the retailer collects it. Keep reading to learn more about these factors. 

Summing Up 

We’ve outlined the basics of California sales tax here, as well as some of the factors that could change the sales tax landscape in California in 2023. If you need any help with your sales taxes, Peak Reliance is there to help you. You may call us at +1 (718) 218-5558 or email at hi@peakreliance.co .