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California Exemptions to Reflect Sales Tax Rate Change


 California BOE Wants T's Crossed and I's Dotted.

The California State Board of Equalization would like to make a number of changes to sales and use tax regulations. The changes stem from the passage of Proposition 30 last fall, which increases the state sales tax by 0.25% for a period of four years, effective January 1, 2013.

The BOE has given notice that it will seek approval for changes to the following regulations:

  • 1532, Teleproduction or Other Postproduction Service Equipment;
  • 1533.1, Farm Equipment and Machinery;
  • 1533.2, Diesel Fuel Used in Farming Activities or Food Processing;
  • 1534, Timber Harvesting Equipment and Machinery;
  • 1535, Racehorse Breeding Stock; and
  • 1598, Motor Vehicle and Aircraft Fuels.

The BOE hopes these changes will be approved during the March 12-14, 2013 Board Meeting.

All of the above are impacted by Proposition 30's addition of section 36 to article XIII of the California Constitution. The BOE explains,

"Section 36, subdivision (f)(1) temporarily increases the state sales and use tax rate by one quarter of one percent… . The regulations referenced above all describe or explain partial exemptions from tax provided by [several sections of the]* Revenue and Taxation Code (RTC)… which apply to the temporary tax imposed by section 36. Therefore, the proposed changes to all of the regulations referenced above incorporate one quarter of one percent increases in the relevant partial exemption rates."

Dot Those T's

The request also notes that the Revenue and Taxation Code was never amended to reflect the July 2011 expiration of a one percent sales and use tax increase. The amendments currently under consideration would include that change. Therefore,

"[T]he proposed amendments to Regulation 1598 also specify that the rate of the partial exemption provided by RTC section 6357.7 was decreased from six percent to five percent from July 1, 2011, through December 31, 2012, before it was increased to five and one quarter percent beginning January 1, 2013."

Breathe deeply now.

The staff is requesting the Board's authorization to make these changes "without the normal notice and public hearing process." This is, in essence, simply a matter of crossing t's and dotting i's. The changes "do not materially alter any requirement, right, responsibility, condition, prescription or other regulatory element of any California Code of Regulations provisions."

How does your business handle exemptions and exemption certificates?

* Sections 6356.5, 6356.6, 6357.1,6357.7, 6358.5, or 6378.

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Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.