California Tax Facts

California is a high-tax state, with some of the steepest sales tax, personal income tax and corporate tax rates in the United States.

In January 2017, the California Tax Foundation released "California Tax Facts: An Overview of the Golden State's Tax Structure." The report provides a comprehensive look at personal and business income taxes, sales and use taxes, property taxes, and other key sources of revenue.

For businesses seeking to create jobs for Californians by locating or expanding in the state, taxes can be a major obstacle. According to studies that provide federal rankings, California has the third-worst state business tax climate in the U.S.

State Sales Tax: Highest in the Nation

California levies a 7.25 percent general sales and use tax, which is the highest statewide rate in the nation. Local governments are permitted to levy additional sales and use taxes, and the combined rate of the additional local taxes should not exceed 2 percent. However, some local governments have been given special dispensation to go above this cap. Click here for the State Board of Equalization's detailed description of the statewide sales and use tax rate, and here for information on additional city and county sales tax rates.

Gasoline Tax: Seventh Highest in the Nation

California's state taxes and fees on gasoline total 38.13 cents per gallon (effective January 1, 2017), the seventh highest in the nation, as reported by the American Petroleum Institute. According to the nonpartisan Legislative Analyst's Office (LAO), California's cap-and-trade program has further increased the price of gasoline by 11-cents per gallon.

Personal Income Tax: Highest in the Nation

California's personal income tax has the highest top rate and one of the most highly progressive structures in the nation. After passage of Proposition 30, California's top rate is 13.3 percent (including the 1 percent surcharge for mental health programs, for all personal income taxpayers with taxable income over $1 million). Maine is second, with a top rate of 10.15 percent. Most small businesses are S Corporations, partnerships, or sole proprietorships, and pay their business taxes at the rates for individuals, which makes California's taxes on small businesses some of the most burdensome in the nation. Seven states do not impose a personal income tax.

Corporate Income Tax: Highest in the West

Those looking to expand or establish a business in California may resort to neighboring states, as California has the highest corporate tax rate in the Western U.S. at 8.84 percent. Compared to the entire U.S., only seven states have a higher top corporate tax rate than California (Alaska, Connecticut, Iowa, Maine, Minnesota, New Jersey, and Pennsylvania).

Property Tax: High, Even Under Proposition 13

As of July 1, 2016, property taxes in California were $1,365 per capita, ranked 22nd highest nationally. Without Proposition 13, the 1978 voter-approved initiative that set limits on property taxes for California property owners, the state likely would rank even worse.

Many California property owners also are required to pay costly parcel taxes. These are annual property taxes (not based upon the value of the property) imposed by many school districts, special districts and other jurisdictions.