Gas stations and convenience stores are versatile businesses that sell a variety of products and services in addition to various gasoline and fuels. California sales tax will apply to most of these transactions depending on the nature of the good or service. Our guide will introduce you to some of the main California sales tax issues for your convenience store along with other details that may affect your sales tax obligations.
California Sales Tax for Other Common Items in Gas Stations and Convenience Stores
In addition to gasoline, your gas station or convenience store likely sells a variety of other goods and services that also have unique sales tax implications.
Taxable Sales at Gas Stations and Convenience Stores in California
Your business will generally have to collect sales tax for the following items commonly sold in your gas station:
- Newspapers, magazines, and other literature
- Tobacco products (including amounts received from a manufacturer or distributor as part of a “buy-down” promotion)
- Beverages (alcohol, carbonated water, soda, and kombucha tea with alcohol content of 0.5% or greater by volume)
- Hot prepared foods (except for hot baked goods unless they are sold as part of a combination with other hot prepared food)
- Over the counter medicine
- Other personal property (e.g., auto supplies, souvenirs, travel supplies, etc.)
Most Non-Taxable and Exempt Sales at California Gas Stations
Other items likely sold at your convenience store may not have any accompanying sales tax collection obligations:
- Noncarbonated and nonalcoholic beverages
- Chips, crackers, candy
- Lunchmeat and cold sandwiches that are sold to-go
- Ice cream and milk
- California lottery game tickets (e.g., scratchers)
Other California Sales Tax Issues for Your Convenience Store
The application of California sales tax to your offered products and services may also depend on the nature of the transaction and other arrangements. For example:
- Car washes: Generally, a nontaxable service when offered for free with the sale of a preset amount of gas gallons purchased.
- Microwave-oven heated foods: Sales tax depends on the location of the microwave (the presumption being that if it’s accessible to customers, then it is a nontaxable convenience).
The purchases you make to further your business will also have different California sales and use tax consequences depending on how you ultimately use those products. For example, items you purchase, and later resale don’t require the advance payment of sales tax with the use of a resale certificate. You only collect sales tax on the resale transaction. However, products you purchase with the intent of resale but then give away or consume will require payment of California use tax.
California Sales Tax on the Sale of Gasoline and Other Fuels
As a gas station or c-store, your business may also involve the sale of gasoline, diesel, and other types of fuel for sale. The complex rules for gasoline sales in California can present a variety of unique challenges for gas station businesses that are slightly beyond the scope of this article. However, we gathered some of the CDTFA’s recent resources on the topic that you can review to learn more on how to report and pay the sales tax related your fuel sales.
- California sales tax rate tables for motor vehicle fuel
- Tax guide for motor vehicle fuel taxes
Exemption Certificate – Train Operators, Off-Highway Use, or Bus Operators
California District Tax Rates - https://www.cdtfa.ca.gov/formspubs/cdtfa105.pdf
Further Guidance for Your California Gas Station’s Sales Tax Questions
Understanding the California sales tax consequences for the various items you sell at your gas station or convenience store can help you with CDTFA compliance and reduce the risk of audit or unnecessary tax liability. The CDTFA routinely accesses your c-store’s data from related reporting on alcohol, cigarette, and credit card transactions to look for missed reporting. This can place your gas station or convenience store at a high risk for future audit when discrepancies exist. If you received an audit notice or have questions, our sales tax professionals are available to handle your gas station’s California sales tax matters including audit defense, consulting, and other tax appeals.
Contact Sales Tax Helper today for a consultation about California sales tax obligations for your gas station.