Sales Tax Rules
California imposes a state sales tax rate of 7.25%, with a maximum combined rate (state plus local) of 10.75% when local taxes are added. Economic nexus is triggered at $500,000 in sales — meaning out-of-state businesses that exceed this threshold must collect and remit California sales tax. SaaS and digital software products are generally exempt from sales tax in California. Groceries are exempt from state sales tax.
SaaS Tax Details
SaaS is generally non-taxable as it is not considered tangible personal property.
Grocery Details
Most groceries are exempt; hot prepared foods are taxable.
What is the sales tax rate in California?
California's state sales tax rate is 7.25%. When local taxes are added, the maximum combined rate can reach 10.75%. The actual rate you pay depends on the county and city where the purchase is made.
What is the economic nexus threshold in California?
California requires out-of-state businesses to collect sales tax once they exceed $500,000 in sales in a calendar year. Once nexus is established, the business must register, collect, and remit California sales tax.
Is SaaS taxable in California?
No. SaaS products are generally exempt from sales tax in California. SaaS is generally non-taxable as it is not considered tangible personal property.
Are groceries taxed in California?
Groceries are generally exempt from sales tax in California. Most groceries are exempt; hot prepared foods are taxable.
Are digital goods taxable in California?
Digital goods are generally exempt from sales tax in California. However, tax law in this area evolves quickly — verify current rules with the California Department of Revenue.
Are clothing items exempt from sales tax in California?
Clothing is subject to sales tax in California at the standard state rate.
How often do I need to file sales tax in California?
California requires sales tax filing on a Monthly, Quarterly, or Annual. Online filing is available through the official Department of Revenue portal.
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Official Source
California Department of Revenue
Last verified: 2026-03-25 · Always confirm current rates with your tax advisor before filing.