California Tax Law
Nothing is certain "except death and taxes." Benjamin Franklin's words ring true to this day as every American must pay federal and state taxes.
One of the major taxes most pay is a personal income tax. California is both progressive and one of the most expensive states for personal income tax. It's also one of the most expensive states to live in.
Whether you live in San Francisco, Los Angeles, or San Diego, you'll need to account for various state and federal, like sales and gasoline taxes. It can be easy to get lost in all of these taxes, so use LawInfo's California tax law articles to help.
California's Progressive Income Tax Rates
Not everyone is charged the same income tax rate in California. Your personal income or jointly filed marriage income places you in one of 10 marginal tax brackets. Each bracket has a specific gross income rate range and an associated, increasing tax rate. The California tax brackets change annually.
Calculating your income tax isn't all that simple. Say your single personal income was $62,400 in 2016. You would fall into the sixth bracket at a 9.3 percent tax rate, so you would calculate your tax payment this way:
- $62,400 minus $52,612 (the highest dollar amount of the previous bracket's income range) equals $9,788.
- Multiply $9,788 by your bracket rate of 9.3 percent (0.093) to equal $910.28 as your base income tax.
- Add $1,437.79 (the maximum tax payment of the previous bracket) to $910.28 for a sum of $2,348.07. This is your total California income tax payment.
California Tax Collectors
There are three major California tax collecting entities that citizens and businesses pay various state taxes. Each department collects specific state taxes, so it's important to know where and what you need to pay:
- The Franchise Tax Board collects personal income and business income ("franchise") taxes. It also collects debts for the California Department of Motor Vehicles for delinquent vehicle registration and court ordered debts.
- The Employment Development Department collects payroll taxes, which are personal income taxes that the employer is partially responsible for paying. It also administers unemployment insurance, disability insurance and various workforce and job training services.
- The Board of Equalization collects sales, use, property and special taxes. Use taxes charge Californians for the use, consumption or storage of personal property within California. Use taxes (similar to sales taxes) are levied against a tangible product which a merchant bought from out of state to sell in California. The BOE also administers personal and franchise tax appeals collected by the FTB.
California Sin Taxes
"Sin" taxes are levied on consumer products like alcohol, tobacco, marijuana and gambling, wherever these things are legalized. They act as additional sales taxes (a.k.a. excise taxes) for products or services that are culturally perceived as vices. Sin taxes are meant to dissuade consumers from purchasing or using the taxed products or services without making them illegal.
Two new sin tax laws were passed in the November 2016 California state election: one which charges a $2.00 sin tax on tobacco products and another that charges a 15 percent sin tax on marijuana products, which was also legalized for recreational use. There are also sin taxes on alcohol at varying rates depending on the alcohol type.
The taxes are collected into state-managed funds which are used for a variety of purposes, including research and health initiatives.
Speak to an Experienced Tax Attorney Today
This article is intended to be helpful and informative. But even common legal matters can become complex and stressful. A qualified tax lawyer can address your particular legal needs, explain the law, and represent you in court. Take the first step now and contact a local tax attorney to discuss your specific legal situation.