General Fund Revenue
Sales and Use Tax

Receipts from sales and use taxes, the state's second largest revenue source, are expected to contribute 28.4 percent of all General Fund revenues and transfers in 2008-09. Figure REV-06 displays sales and use tax revenues for the General Fund, as well as special state funds, for 2006-07 through 2008-09.

The sales tax applies to sales of tangible personal property in California; the companion use tax applies to property purchased outside the state for use within California. Most retail sales and leases are subject to the tax. Exemptions from the tax for necessities such as food for home consumption, prescription drugs, and electricity make the tax less regressive. Other exemptions provide tax relief for purchasers of particular products - e.g., farm equipment, custom computer programs, or materials used in space flights.

The largest single component of the sales tax base is new motor vehicle sales, accounting for 11.5 percent of all sales in 2005. Other transportation purchases and fuel sales represented 19.7 percent and 8.6 percent of all sales, while building-related purchases accounted for 14.3 percent. Detailed taxable sales data by component is not yet available for all of 2006.


SALES AND USE TAX REVENUE
(IN BILLIONS)
 2006-07 (Preliminary) $27.445

2007-08 (Forecast) $27.689

2008-09 (Forecast) $29.215

Taxable sales grew by an estimated 4.0 percent in 2006 (fourth quarter 2006 sales tax data is preliminary). Preliminary data for the first three quarters indicate that taxable sales for the year are expected to grow by only 0.9 percent in 2007. The slowdown in 2007 is attributed primarily to the weak housing market. Taxable sales are anticipated to recover somewhat in 2008 as the housing market begins to improve, increasing by 3.4 percent over 2007 sales. In 2009, growth of 4.6 percent is expected.

Sales and use tax revenues are forecast relating taxable sales to economic factors such as income, employment, housing starts, new vehicle sales, and inflation. The estimate for 2008-09 includes $21 million in additional General Fund revenues from making permanent the use tax on vessels, vehicles, and aircraft brought into the state less than one year from purchase. Another $57.7 million in General Fund revenue will result from certain measures adopted by the Board of Equalization intended to increase tax revenues and reduce the tax gap.


ADDITIONAL INFORMATION
 The Board of Equalization, which administers the sales and use tax, tobacco tax, alcoholic beverage taxes, and fuel taxes provides additional information in its annual report, which is available on its website, www.boe.ca.gov. Information on sales tax exemptions is included in the Department of Finance's Tax Expenditure Report, published annually on the Internet at www.dof.ca.gov in "Reports and Periodicals."

Current law requires that a portion of the sales tax on gasoline and diesel fuel go to the Public Transportation Account (PTA) and the Mass Transportation Fund (MTF). (The transportation community refers to the gasoline tax portion of this as "spillover" sales tax revenues.) In 2007-08, the first $622 million of spillover revenues that would otherwise be transferred to the PTA will be transferred to the MTF. Starting in 2008-09, half of all spillover revenues, or an estimated $455 million in 2008-09, will be transferred to the MTF. Including the sales tax on diesel fuel, an estimated $1.158 billion in sales tax revenue will go to the PTA and MTF in 2007-08, and an estimated $1.343 billion in 2008-09. Spillover revenues have increased substantially in recent years as gasoline prices have risen.

Figure REV-07 displays the individual elements of the state and local sales tax rates. Figure REV-08 shows combined state and local tax rates for each county.
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CHAPTER HIGHLIGHTS for Revenue Estimates Back to Top

 General Fund Revenue
  Personal Income Tax
 image of black pointing arrowSales and Use Tax
  Corporation Tax
  Insurance Tax
  Alcoholic Beverage Taxes
  Cigarette Tax
  Property Taxes
  Estate/Inheritance/Gift Taxes
  Other Revenues
 Special Fund Revenue
PRINTABLE BUDGET DOCUMENTS Back to Top
Budget Summary - Revenue Estimates (pdf * - 540K) -
Provides this entire Revenue Estimates Chapter in pdf format.

SCHEDULE 2 - Summary of State Tax Collections (pdf * - 113K) -
State Tax Collections per capita and per $100 of personal income.

SCHEDULE 3 - Comparative Yield of State Taxes (pdf * - 116K) -
Revenues for Major State Taxes from 1970-71 through 2008-09.

SCHEDULE 8 - Comparative Statement of Revenues (pdf * - 18K) -
Detail of General and special fund revenues by source for the past, current, and budget years within the following categories: (1) major taxes and licenses, (2) minor revenues, and (3) transfers and loans.