Sales Tax for California

[GTS1101]

I have a client who sells gift baskets to friends, families, and businesses. These gift baskets have all kinds of items in them from shampoo to food products to little knick knack items, to gift certificates. California law states that consumable food products are not charged sales tax. Well if she sells a gift basket that has a combination of products in them how does she figure out the sales price of the food products so she doesn't charge tax on that porition? That to me seems impossible. Do you know of any loophole for this type of sale? She said other people she knows who do this business are charging the sales tax on the entire basket regardless of whether food items or not. Also if she does not have a resale number can she deduct the amount she paid retail sales tax for items to be put in the basket for sale to customers.

If you can't help since this is related to sales tax for a specific state I understand. The rules for sales tax are just so confusing I thought I would give you a try.

Thanks!

GTS1101

[dsi]

If the nontaxable items in the basket are de minimus, I too would charge s/t on the entire basket. As it is with all states, CA is fearcily looking for $$$ anywhere they can find them.

[jainen]

they will get mean

>>if she does not have a resale number can she deduct the amount she paid retail sales tax for items to be put in the basket<<

Yes, tax paid is part of the cost of goods sold.

How is she going to remit the sales tax collected if she doesn't have a resale number? She should get one--it is very easy. If she doesn't mind stretching the rules she can probably operate small-time for a while without the paperwork. Sooner or later the Board of Equalization will come calling. If she says, "Oh, I'm sorry, I had no idea. Where do I sign?" everything will be fine. If she says, "Why are you picking on me? I don't even make a profit, and food is not taxable anyway," then they will get mean.

[Roland Slugg]

Reference

Dear GTS1101

Try this link ... it should answer all your questions: http://www.boe.ca.gov/

Information about getting a sales tax license is on the splash page. For information on gift baskets, click "Forms and Publications" then "Sales & Use Tax ... Publications" (in the blue grid near the top of that screen), then "Pub 31." Information about gift baskets starts on page 2.

By the way, gift certificates included in the baskets sold are not taxable. GCs are like cash, and tax will be charged by the retailer if the GCs are redeemed for taxable merchandise.