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California Sales Tax Exemptions

What is Exempt From Sales Tax In California?

california sales tax exemptions

The state of California currently levies a 7.25% state sales tax rate. Between January 1, 2013 and December 31, 2016 the state sales tax rate was 7.5%. The reduction to the current 7.25% rate took effect on January 1, 2017. The temporary 4-year increase in the state sales tax rate was a result of the increase passed under Proposition 30 which was on the November 6, 2012 ballot for California votes. The initiative was approved by 55.4% of voters. See below for more detailed information about relevant California sales tax exemptions and use tax.


Counties & local municipalities also levy their own sales taxes in addition to the state rate. Currently, California’s combined sales tax rates range between 7.25% and 9.75%. The combined rate includes state, district, county and city sales tax.



Use tax is applied on the same basis and at the same rates as sales tax is within the state of California. For monthly-filers, returns are due on or before the last day of the month following the month in which the purchases were made. For example, purchases made in the month of January should be filed with the state of California on or before the last day of February.



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California Sales Tax Exemptions by Industry: Manufacturers

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Effective July 1, 2014, the state of enacted a new California sales and use tax exemption for purchases of manufacturing machinery and equipment as well as research and development (R&D) equipment. The exemption is currently in place between 7/1/2014 and 6/30/2022. This is a partial sales and use tax exemption from the state rate, not a complete exemption.


One other prominent exemption for the manufacturing industry is for items consumed in the production process that become an ingredient or component part of the final product. Other than these two exemptions, there are few other California sales tax exemptions for the manufacturing industry.



Please reach out to our sales tax consultants for help to maximize the benefit your organization receives from California’s sales tax exemptions.


California Sales Tax Exemptions by Industry: Software

As a result of the Court of Appeal’s decision in Nortel Networks, Inc. v. State Board of Equalization (2011) the purchases of many non-custom software programs are not subject to California sales tax. Most off-the-shelf or boxed software will not qualify for the exemption because the seller must hold the patent or copyright or licensing interests. Qualifying purchases are designated as Software Technology Transfer Agreements or TTA’s.



Agile Consulting Group’s sales tax consultants can advise about which particular software programs will qualify as TTA’s and will assist in communicating with vendors to both set up future transactions as tax exempt and recover sales taxes charged in error over the prior 36 months.


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California Sales Tax Exemptions by Industry: Agriculture

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The agriculture industry also enjoys partial California sales tax exemptions. Purchases of specific farm machinery and equipment for businesses classified under North American Industry Classification System (NAICS) codes 0111 to 0291 qualify under this exemption. There is a broad list of items qualifying for this partial exemption.

Sales Tax Compliance FAQs

Sales tax compliance can be intimidating, but it doesn't have to be!

  • Do I have to charge sales tax?

    You do if your business is considered to be "doing business" within a state. The Supreme Court ruling in SD v. Wayfair on June 21, 2018 changed the standard by which this was determined. Now, if your business has a sufficient volume or revenues or transactions within a state, you have established nexus within that state. Nexus means you have to charge sales tax to your customers within that state.

  • How do we know if we have sales tax nexus in a state?

    Agile will complete a sales tax nexus study to determine in which states you have met or exceeded the nexus thresholds. All we need are your: a) physical locations, and; b) prior years sales records to analyze both revenues and transaction counts per state.

  • How do I know what sales tax rate to charge?

    Don't try to reinvent the wheel. There are a number of excellent sales tax rate software solutions in the marketplace and we are partners with ALL of them. Ask us for our input on which would be the best choice for your business and we'll gladly guide you and provide an introduction to one (or several options) available in the marketplace.

  • Are my products or services subject to sales tax?

    Well, the answer like most everything is sales tax is, "it depends," because each state drafts its own laws and they vary widely from state-to-state. A sales tax consulting firm, such as Agile, should perform a taxability study on the products and services your business sells in any states where you have nexus to determine whether you should be collecting sales tax on your sales of those products or services.

  • Which sales tax software is best for my business?

    There are a number of excellent choices in the sales tax software space. We are a sales tax consulting partner with ALL the available options in the marketplace. Leverage our years worth of firsthand experience with these options to help guide you to the best choice for your business.

  • How do I register for sales tax with a state?

    Agile can do this for you. Most states require the same information to process a registration. Things like: legal entity name, FEIN #, date of incorporation, etc. All states require the names, date-of-birth and social security numbers of officers. Some states will even require a copy of an officer's driver's license.

  • Should we register or file a voluntary disclosure agreement ("VDA")?

    Completing a registration will allow your business to begin collecting taxes going forward. If you have taxes from prior periods to disclose, a VDA will enable you to do so with the added benefit of the penalties being waived.

  • How do states determine your filing frequency?


    Your assigned filing frequency depends on the volume of transactions you have within a state. Many states will ask about your expected volume of sales during the registration (or VDA) process. Some other states will initially default your account to monthly filings. All states will re-evaluate your filing frequency on an annual basis.

  • Will Agile handle any notices and communications received from the state(s)?

    Yes! We will absolutely handle all notices and communications you receive from the state(s) regarding sales and use tax. We provide a comprehensive, turnkey solution to outsource your sales and use tax issues.

  • How do I determine my taxable sales?

    Determining taxable sales is the first, and most important step in determining your monthly sales tax filing obligations. Sales tax software, if properly configured, can solve or at least simplify this process. Combine that with an accurate matrix classifying your products or services taxability, and this becomes a cinch! 

Find the sales tax exemptions for your state

Select any state in the map below to view all relevant sales and use tax information available for that state.

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