California Sales Tax for Interior Designers - Credit Sales / Installment Payments

The total sales you list on your sales and use tax return must include the price of items you sold on credit during the reporting period, even though you may not receive full payment until a later date.

Tax is due on the full selling price.

However, you may exclude amounts for insurance, interest, finance, and carrying charges from the taxable selling price you report for a credit sale, provided you keep adequate and complete records documenting those charges.

Tax is due when ownership or possession of the product sold transfers to your client, regardless of when you receive payment.

Consequently, if you take a deposit for future delivery of merchandise, you should not report that amount on your tax return until the delivery is actually made or you transfer ownership to your client.

Example

In June, a client places an order for new chairs, tables, and a desk for her office, for a total price of $7,500. You deliver the products in July. The client pays you $4,500 in June and agrees to pay the balance in two monthly installments. Regardless of when you receive the balance due, the full $7,500 sale must be included in your total sales for the tax return that covers the month of July.


Source: California Department of Tax & Fee Administration (CDTFA)

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