What Is Sales Tax in San Francisco?

Sales tax serves as a consumption tax, meaning it is applied to the sale of goods and certain services. It represents a common component of daily transactions, added to the purchase price of items at the point of sale. In San Francisco, this tax contributes significantly to local and state government funding.

Current Sales Tax Rate

The combined sales tax rate in San Francisco is 8.625%. The statewide sales tax rate in California is 7.25%. This state portion includes funds for the general fund, local public safety, and local health and social services.

The remaining portion of San Francisco’s sales tax rate, 1.375%, represents local add-ons, encompassing city-specific and district taxes. These local district taxes are approved by voters and often fund specific services, such as transportation infrastructure or other community programs. Sales tax rates vary across California due to these local district taxes, with San Francisco’s rate being on the higher end. Tax rates are subject to change; verify current information with the California Department of Tax and Fee Administration (CDTFA).

Transactions Subject to Sales Tax

Sales tax in San Francisco primarily applies to the retail sale of tangible personal property. Tangible personal property refers to physical goods that can be seen, weighed, measured, felt, or touched. Common examples include furniture, giftware, toys, antiques, and clothing purchased in stores.

Services are generally not subject to sales tax unless directly tied to the sale or production of tangible personal property. For instance, if a service involves creating or fabricating a new tangible item, such as custom manufacturing or assembly, the associated labor can become taxable. Services that are an inseparable part of a taxable sale, like calibration fees for machinery sold, are also subject to sales tax.

Common Exemptions

Several categories of goods and transactions are exempt from sales tax in California. Most food products for home consumption, such as groceries, are exempt from sales tax. However, this exemption does not extend to prepared meals sold by restaurants or hot food products intended for immediate consumption.

Prescription medicines are exempt from sales tax when dispensed for human use. Sales of items purchased specifically for resale by a business are exempt, provided the buyer furnishes a valid resale certificate to the seller. This exemption prevents multiple layers of sales tax on the same item as it moves through the supply chain before reaching the final consumer. Other exemptions include certain medical devices and some agricultural products.

Administration of Sales Tax

Retailers operating in San Francisco are responsible for collecting sales tax directly from consumers at the time of purchase. This means that the sales tax amount is added to the price of taxable goods and services. The collected tax money does not belong to the retailer but is held in trust for the state.

Retailers then remit these collected sales taxes to the California Department of Tax and Fee Administration (CDTFA). The CDTFA is the state agency tasked with administering sales and use taxes throughout California. The revenue generated from sales tax is a significant funding source, utilized by state and local governments to support a wide array of public services, infrastructure projects, and local initiatives within San Francisco.