Last autumn’s elections will increase the sales and use tax by an average of 0.78 percentage points for over 1.75 million people across over thirty municipalities, termed “districts” by the California Department of Tax and Fee Administration (CDTFA) which administers the sales and use tax. These changes will become effective on April 1, 2023. One can determine the applicable rate increase by their address through an online tool provided by the CDTFA and will be updated with the new tax rates when they become effective.
California’s sales and use tax usually has seven components, and the CDTFA offers a guide explaining how the funds for each are used. Six of these components are set by the state, 5 through the Revenue and Taxation Code, and 1 through Article XIII of the state constitution. These components create a statewide minimum tax rate of 7.25%. The 7th component may be established by districts through local elections and is known as the “district tax.” Such elections arise through a petition (an initiative) or an ordinance passed by the district government and then decided by the district’s voters (a referendum). An initiative requires only a simple majority, but a referendum requires a two-thirds majority vote. The maximum district tax for most municipalities is two percentage points as judged per county. If a city levies a 1% district tax, the county can only levy a 1% district tax within that city’s limits. The Legislature has granted exceptions to the 2% rule for certain large districts, resulting in rates as high as 10.75% for Alameda County, for example.
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