How the California Sales Tax Rate Is Determined

Marc Boulanger • July 1, 2025

Ever wonder why your invoice says 7.75% in one city and 9.5% in another?

The California sales tax rate is anything but simple — and it causes confusion for both business owners and customers. As a business owner, knowing how the state and local rates are structured can help you collect and remit the correct tax, avoid audit issues with the CDTFA, and keep your business compliant.

In this guide, we’ll break down:

How California calculates sales tax
The difference between statewide and local rates
Which rates apply to you
How to find the correct rate for your city
And what happens if you charge the wrong amount

California Sales Tax Rate Basics

The base statewide sales tax rate in California is 7.25%. But that’s just the beginning.

Each jurisdiction (cities, counties, and special districts) can impose additional local taxes, known as district taxes, which stack on top of the statewide rate.

That’s why the total sales tax in one city might be:

7.75% in Orange
8.75% in Anaheim
9.5% in Los Angeles

And those rates change often.

Sales Tax Structure in California

Tax Type	Applies To	Set By	Example
Statewide Tax (7.25%)	All sales in CA	State legislature	Base rate
Local Taxes	Certain districts	City, county, transit, schools	Voter-approved
Combined Rate	Total amount you must collect	Based on seller’s or customer’s location	7.25% – 10.75%+

Origin-Based vs. Destination-Based Sales Tax

California is a hybrid state when it comes to sales tax sourcing.

In-state sales (shipped or delivered): Tax is based on destination
Over-the-counter sales: Tax is based on your business location

So if a customer walks into your shop in Santa Ana, they pay your local rate. But if you ship an item to someone in San Diego, you must charge San Diego’s combined tax rate.

This is where many businesses make mistakes — especially ecommerce sellers and contractors who deliver across county lines.

How to Look Up the Correct Rate

The CDTFA provides several tools to help determine the right sales tax rate:

CDTFA Online Lookup Tool
https://www.cdtfa.ca.gov/taxes-and-fees/rates.aspx
Mobile App / Address Lookup
You can input a customer’s delivery address and see the current district tax
Sales and Use Tax Rate Chart by City/County
PDF tables that are updated quarterly

Rates can change quarterly — and apply based on when the sale occurs, not when you receive payment.

Common Mistakes in Rate Application

Using your business address for every sale

If you deliver or ship to customers, you may be applying the wrong district tax rate.

Failing to update rates

Some districts increase tax via local ballot measures, and CDTFA enforces those changes.

Under-collecting tax

You can be personally liable for sales tax you failed to collect — even if it was an honest mistake.

Industry-Specific Examples

Restaurants: Usually origin-based (on-site dining), but deliveries are destination-based.
Online Sellers: Must charge based on where the item is shipped, including multiple district rates.
Contractors: May owe tax on materials or equipment based on project delivery location.
Auto Repair Shops: Applies to parts and labor differently, depending on locality.

What Happens If You Apply the Wrong Rate?

If you charge too much:

The customer may file a complaint
You may be forced to refund the overage

If you charge too little:

You’re liable for the shortfall, even if the customer already paid you

During a CDTFA audit, auditors will compare your sales tax rate to your delivery addresses, POS system data, and ZIP code records. If they find discrepancies, you could owe back taxes, interest, and penalties.