California Sales and Use Tax

• Unless the buyer is exempt from sales and use tax, California requires the payment of sales tax when leasing or purchasing merchandise within the state. Merchandise that is purchased in another state and consumed in California requires the buyer to pay a use tax. If the buyer was not required to pay sales tax in the originating state, then the use tax is 100 percent of the California sales tax rate. If the originating state's sales tax is less than the California rate, then the use tax amount is equal to the difference.
  
  

Wholly Owned U.S. Agencies and Instrumentalities

• The United States Congress has the authority to create agencies and other types of entities to administer and enforce federal laws and mandates. California Sales and Use Tax Regulation 1614 refers to these wholly owned incorporated and unincorporated government entities as instrumentalities, and they are not subject to California sales and use tax. Wholly owned U.S. government agencies and instrumentalities include the Department of Labor, the Department of Veterans Affairs, the National Railroad Passenger Corporation (AMTRAK) and the Federal Deposit Insurance Corporation.
  
  

Incorporated Federal Instrumentality

• Federally-chartered banks are not wholly owned by the U.S. government, but they are incorporated federal instrumentalities. California does not require sellers to apply sales tax when an incorporated federal instrumentality is not subject to state taxation. Early Supreme Court decisions have upheld the practice of exempting federally chartered banks from state taxation.
  
  

American National Red Cross

• The American National Red Cross, also known as the American Red Cross, is a federally chartered humanitarian organization. Sales to the American National Red Cross are exempt from California sales tax. Sales to American National Red Cross branches and chapters are also exempt from California sales tax.
  
  

Armed Services

• Military commissaries, exchange centers and morale, welfare and recreation (MWR) centers provide military personnel and their family members with household supplies and recreation at discounted prices. When established according to armed services regulations, they are instrumentalities of the U.S. government. As such, they are not subject to California sales and use tax. Suppliers are required to obtain a certificate from the buyer stating that the establishment meets armed services regulations. California also exempts selective service purchases.
  
  

Medicare

• The contract for Medicare Part A inpatient benefits is between the health care provider and the U.S. government. Sales to individuals for Medicare Part A supplies and equipment purchases are not subject to California sales and use tax. Medicare Part B provides coverage for outpatient health expenses. The contractual agreement is between the individual and the health care provider. California Sales and Use Tax Regulation 1614 exemptions do not apply to Medicare Part B purchases.