If your business is on California’s accelerated schedule, each quarter you owe two sales tax prepayments to the California Department of Tax and Fee Administration (CDTFA), each due by the 24th of the following month and each equal to at least 90% of that period’s state and local tax liability. The full quarterly return follows at the end of the next month and reconciles what you prepaid against what you actually owe. A California sales tax prepayment that arrives late triggers a 6% penalty on the amount due.
Who Has to Prepay
The CDTFA puts you on the quarterly prepayment schedule when your estimated tax liability averages $17,000 or more per month under Revenue and Taxation Code Section 6471.1California Department of Tax and Fee Administration. Revenue and Taxation Code 6471 – Prepayment That threshold is tax liability, not gross taxable sales. You don’t opt in. The CDTFA notifies you in writing, and once that notice arrives you stay on the schedule every quarter until the CDTFA tells you otherwise in writing.2California Department of Tax and Fee Administration. Return Prepayments If your sales fall off and you believe you no longer qualify, you can ask the CDTFA to remove you, but the change isn’t effective until they confirm it.
When Prepayments Are Due
Every quarter has two prepayment deadlines, both landing on the 24th.3California Department of Tax and Fee Administration. EFT Filing Instructions for Sales and Use Tax Prepayment Accounts The first prepayment is due by the 24th of the quarter’s second month, and the second by the 24th of the quarter’s third month. For the April–June quarter, that means May 24 and June 24.
After both prepayments go in, your full quarterly return is due the last day of the month following the quarter: April 30 for Q1, July 31 for Q2, October 31 for Q3, and January 31 for Q4.4California Department of Tax and Fee Administration. Filing Dates for Sales and Use Tax Returns If a deadline lands on a weekend or state holiday, the next business day counts as timely.
How Much to Prepay
For the first, third, and fourth quarters, each prepayment must equal at least 90% of your state and local tax liability for the month it covers.1California Department of Tax and Fee Administration. Revenue and Taxation Code 6471 – Prepayment Include district taxes and any local add-ons in the calculation, not just the base state rate. You can also pay 100% of each month’s liability; nothing caps voluntary overpayment, and it reduces the balance due on the quarterly return.2California Department of Tax and Fee Administration. Return Prepayments
The Second Quarter’s Different Math
The April–June quarter is where mistakes concentrate. Your first prepayment, due May 24, follows the standard formula: 90% of April’s state and local tax liability. The second prepayment, due June 24, covers a longer window and you can choose between two calculation methods.1California Department of Tax and Fee Administration. Revenue and Taxation Code 6471 – Prepayment
- Option A: 90% of your May tax liability plus 90% of the tax liability for the first 15 days of June. This covers May 1 through June 15.
- Option B: 90% of your May tax liability plus an additional 50% of that same 90% figure. Simpler, because it estimates the June portion instead of requiring a mid-month cutoff.
Using Last Year’s Numbers Instead
If your business operated in the same quarter last year, you can skip the current-period calculation and base prepayments on the prior-year return. For Q1, Q3, and Q4, each prepayment equals one-third of the total tax liability you reported for the same quarter last year, adjusted for the current tax rate.1California Department of Tax and Fee Administration. Revenue and Taxation Code 6471 – Prepayment For Q2, your first prepayment is one-third of the prior year’s Q2 liability and the second jumps to one-half of that figure, reflecting the longer period the second payment covers.
The prior-year method works best when sales are stable. If sales have grown, prior-year numbers will leave you underpaid and owing a bigger balance on the return. If sales have dropped, you’ll overpay and wait for a credit.
How to Pay
The CDTFA accepts prepayments through its online portal and by mail. Logged into your account, you can pay from a bank account at no charge or by credit card with a 2.3% vendor fee. Checks and money orders are accepted if postmarked by the deadline.5California Department of Tax and Fee Administration. Make a Payment The CDTFA does not accept cash at its offices without a specific exemption.
Businesses with an estimated monthly tax liability of $10,000 or more must pay by Electronic Funds Transfer. The EFT threshold is separate from the $17,000 prepayment trigger, so some businesses on the prepayment schedule fall below the EFT mandate and can still use other methods.6California Department of Tax and Fee Administration. Regulation 1707 – Electronic Funds Transfer EFT runs through ACH debits, ACH credits, or Federal Reserve wire transfers. If you’re required to use EFT and you pay by check, card, or any other method, the CDTFA adds a penalty on top of any late-payment penalty.
Save every confirmation. The online system generates a receipt after each transaction, and the portal keeps a transaction history, but download or print each confirmation and keep it for at least four years in case you need it during reconciliation or audit.
Penalties for Late or Missed Prepayments
A prepayment that arrives after the 24th but before the last day of the month following the quarter triggers a 6% penalty on the prepayment amount.7California Legislative Information. California Code Revenue and Taxation Code 6476 On a $20,000 prepayment, that’s $1,200. Miss the outer deadline and the unpaid amount rolls into your quarterly return, where standard delinquency penalties and interest apply.
Section 6592 lets the CDTFA waive the 6% penalty if you show the late payment resulted from reasonable cause and circumstances beyond your control, despite exercising ordinary care.8California Department of Tax and Fee Administration. Revenue and Taxation Code 6592 – Excusable Delay Natural disasters, serious illness, and system outages that blocked timely filing are the kinds of situations that qualify. Forgetting a deadline or running short on cash does not.
Reconciling on the Quarterly Return
Your two prepayments are credits against the total tax liability reported on the quarterly return. If prepayments exceed what you actually owe, the overpayment carries forward as a credit to the next quarter or can be claimed as a refund. If they fall short, the remaining balance is due with the quarterly return by the filing deadline.4California Department of Tax and Fee Administration. Filing Dates for Sales and Use Tax Returns Because prepayments are estimates, some gap on the quarterly return is normal; the 90% rule assumes it.