How to Correctly Calculate the California Sales Tax Rate Using Geo-Based Technology
September 5, 2016
September 5, 2016
Most online tools do not calculate California sales tax correctly
California sales tax is complicated. To correctly calculate the sales tax rate, let’s first understand its requirements.
According to California Board of Equalization Publication 44 “District Taxes” (Sales and Use Tax), most businesses in California are located – or do business in – special sales and use tax districts.
What is a district?
A “district” is a local jurisdiction that, under enabling statutes in various codes, may impose transactions (sales) and use taxes within its borders. Voter approved district taxes may be levied on a countywide basis and within incorporated city limits. A city district tax rate applies only to addresses within the incorporated city limits. Additionally, more than one district tax may be in effect in a given location.
What are district taxes?
District taxes are either transactions (sales) or use taxes. The Revenue and Taxation Code provides that transactions (sales) taxes are due from retailers on their sales of tangible personal property, and use taxes are due from purchasers for their use of tangible personal property in the district. “Use” is defined as the use, storage, or other consumption of tangible personal property.
So, in order to correctly calculate California sales tax, you need to know:
- County and city district sales tax rates
- If the address is within the incorporated city limits
The information for county and city district sales tax rates are easy to find. California Board of Equalization publishes the county and city tax sales and use tax rates on http://www.boe.ca.gov/app/rates.aspx. You can locate the rates by county and/or by city.
The challenge is to figure out if the address is within the incorporated city limits. Some people think they can identify the incorporated city by the name of the city included in the address. Unfortunately most addresses are mailing address by US Postal Office.
The name of the city in the mailing address can be the mailing city, in other words, the city in which the postal office delivering to the address is located. This mailing city may be different from the physical city that the address is located in. So we can’t use it to correctly determine its physical city, let alone if it’s within the incorporated city limits.
The complexities of zip codes
Some people wonder if zip codes can determine the incorporated city limit. In fact, a lot of shopping cart service providers and softwares use zip codes to match the sales tax rates. Unfortunately many zip codes breach city boundaries, making them an unsuitable method as well.
How can you correctly calculate California sales tax?
The only solution to accurately calculate California sales tax is through a geo-based technology to find out its municipality. Municipality is a city or town that has corporate status and local government. If the address has a municipality, it means it’s within an incorporated city. It the address does not have a municipality, it’s outside of an incorporated city and it is only part of a county.
Let’s look at the city of Campbell in Santa Clara county, California.
Here is the breakdown of the county and city district sales and use taxes as of 9/5/2016. On top of the state tax of 7.5%, the total county district tax is 1.25%, and the total city district tax is 0.25%.
County district tax:
- Santa Clara County Transit District (SCCT): 0.500%
- Santa Clara County Valley Transportation Authority (SCVT): 0.500%
- Santa Clara VTA BART Operating and Maintenance Transactions and Use Tax (SVTB): 0.125%
- Santa Clara County Retail Transactions and Use Tax (SCCR): 0.125%
- Total county district tax: 1.250%
City district tax:
- City of Campbell Vital City Services, Maintenance and Protection Transactions and Use Tax (CMPL): 0.250%
- Total city district tax: 0.250%
Now let’s look at the following 2 addresses:
Address 1: 1 W Campbell Ave, Campbell, CA 95008.
Address 2: 1130 Normandy Dr, Campbell, CA 95008
The map below shows the locations of these 2 addresses produced by USgeocoder. The areas highlighted in light gray are incorporated areas that are within the incorporated city of Campbell. Their municipality is Campbell. The areas highlighted in yellow are un-incorporated areas that are surrounded by the incorporated city of Campbell.
The address “1 W Campbell Ave” is located within the city limit of the incorporated city of Campbell. Its total California sales tax rate is 9% (7.5%+ 1.25% + 0.25%).
However, the address “1130 Normandy Dr.” is located in an un-incorporated area surrounded by the city of Campbell. So the city district tax does not apply. Its total California sales tax rate is 8.75% (7.5%+ 1.25%).
Harness the power of our GIS technology to determine municipality and sales tax rate
To find municipality for any U.S. address, you can use the free lookup at USgecoder.com. Just enter an address and its zip code, press the “Free Lookup” button and you will find the municipality for the input address. If it’s within an incorporated city limit, it will show the name of the city. If it’s not within an incorporated city limit, it will say “Un-incorporated Area”.
To find the sales tax rate for a specific address in California, you can do the same with our free address-based location lookup tool. It will show the total tax rate with the breakdown and details information of county and city district tax rate. If the address is in an unincorporated area, it will say “N/A – Unincorporated Area 0%” for the city district tax.
Here is the screenshot of the search result for 1130 Normandy Dr, Campbell, CA 90058, an address that is not within a city limit.
Interested in learning more about the district matching and location lookup service entrusted by organizations including FedEx, Coca-Cola Bottling Company, the Smithsonian and the National Multifamily Housing Council? Discover better accuracy and complete data privacy protection today!