California Sales & Use Tax — CDTFA-401-A / 401-EZ Return

Determine whether the seller has physical or economic nexus in California and confirm active registration with the CDTFA. California's economic nexus threshold is $500,000 in total California sales (revenue only, no transaction-count test). Physical nexus arises from any office, warehouse, employee, or inventory in-state. If unregistered, a Seller's Permit must be obtained from CDTFA before any return can be filed.

Confirm the filing frequency assigned by CDTFA (monthly, quarterly, or annual) and identify the exact return period. Monthly and quarterly filers use CDTFA-401-A; small sellers eligible for simplified reporting may use CDTFA-401-EZ. Large quarterly filers may also be subject to the prepayment requirement (24th of the first two months of a quarter). Establish the period start and end dates and all relevant due dates.

Classify each revenue stream against California's taxability rules. Tangible personal property is taxable at 7.25% plus applicable district taxes; services, pure SaaS, and cold grocery food are generally exempt. Resale sales require a valid CDTFA-230 resale certificate on file. Manufacturing equipment purchases may qualify for the partial exemption under R&TC Section 6377.1 (CDTFA-230-M). Any sales shipped outside California are exempt under R&TC Section 6396.

California uses destination-based sourcing for district taxes on shipped goods; counter sales use the seller's location rate. The statewide minimum is 7.25%, but combined rates vary from 7.25% to ~10.75% depending on the customer's delivery ZIP code. Each district tax must be reported separately on Schedule A of CDTFA-401-A. Use the CDTFA rate lookup tool (cdtfa.ca.gov/taxes-and-fees/rates.aspx) to confirm rates for every ship-to jurisdiction.

Identify any purchases made without paying California sales tax on which use tax is owed. Common triggers include out-of-state vendor purchases used in California, items purchased for resale that were later converted to personal/business use, and taxable items bought from vendors who did not collect California tax. Use tax is reported on the same CDTFA-401-A return at the same rate as sales tax.

Compile all data into CDTFA-401-A (or CDTFA-401-EZ for eligible small sellers) and file through the CDTFA Online Services portal (onlineservices.cdtfa.ca.gov). Report total gross sales, deductions (exempt sales, resales, out-of-state sales), net taxable sales, district tax amounts by Schedule A, and use tax. Apply any prepayments made during the period. Remit the net tax due by the return deadline to avoid the 10% late payment penalty.