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California: Dry Cleaning Services and Sales Tax


 Taxable or exempt in California?

California exempts more services than it taxes. However, according to the California State Board of Equalization (BOE), sales tax “applies to charges for producing, fabricating, or processing tangible personal property for your customers.” So how does sales tax apply to the dry cleaning industry?

A publication explaining exactly how sales tax pertains to dry cleaners has been reissued recently by the BOE. It turns out the issue is more complex than simply dropping a shirt off to be pressed.

Dry cleaners typically offer a variety of services, from cleaning and pressing to altering and repairing. They may also sell items, such as stain removal products or lint brushes. The services and products offered by a dry cleaner impact permitting and tax reporting requirements.

Purchases: for use and resale

Dry cleaners are considered the consumers of the supplies they use to provide cleaning services. Sales tax should therefore be paid on the purchase of these supplies. Any items purchased without sales tax for the dry cleaner’s use are subject to use tax; for example, supplies purchased online or in another state.

Qualified purchasers (those who “receive at least $100,000 in gross receipts from business operations per calendar year” who are “not required to hold a seller’s permit) should obtain a sales and use tax permit and report use tax. If no such permit is required, use tax may be paid directly to the California BOE or reported on a California income tax return.

Items purchased for resale may be purchased tax exempt, provided the seller is given a properly completed resale certificate at the time of sale.

When purchasing an item that may be either for use or resale, pay sales tax on it. If you use it, you’re covered. If the item is eventually resold, a tax-paid purchases resold deduction may be taken.

Is a seller’s permit required?

A seller’s permit is not required for dry cleaners that “only provide cleaning and preservation services.” A use tax permit may still be required.

A Seller’s permit is required for dry cleaners who:

  • Sell miscellaneous merchandise (such as lint brushes); or
  • Alter new household or non-clothing items.

A seller’s permit may be required for dry cleaners who:

  • Alter used household or non-clothing items; or
  • Alter clothing.

BOE Publication 125 goes on to provide examples taxable and exempt charges. It’s a “must read” for anyone in the dry cleaning business.

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photo credit: Thomas Hawk via photopin cc


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.