California does have local taxes, but not the kind many people expect: no city or county in the state levies a personal income tax. What you pay locally comes through property tax bills, sales tax added at the register, real estate transfer tax at closing, hotel tax on short stays, utility user tax on your monthly bills, flat-rate parcel taxes, and, for businesses, city license or gross receipts taxes. Together these can add thousands of dollars a year to what a California household and business owes beyond the state-level bill.
No Local Income Tax on Individuals
If you earn wages or salary in California, your income tax goes to one place: the state Franchise Tax Board. No city or county imposes a separate personal income tax or payroll tax. That puts California in a different category from states like New York, Ohio, and Pennsylvania, where local income taxes can add 1% to 4% on top of the state rate.1Tax Policy Center. How Do State and Local Individual Income Taxes Work?
The exception is businesses. Many California cities impose a business license tax or gross receipts tax on companies operating within their boundaries. These apply to the privilege of doing business in the city and are owed regardless of whether the business turns a profit. A company running at a loss can still owe local tax based on total revenue, employee count, or type of activity. San Francisco, for example, uses a gross receipts tax with rates tiered by industry and revenue; for retail and wholesale businesses in 2025 and 2026, the rate starts at 0.1% on the first $1 million in gross receipts and climbs past 1% above $1 billion.2American Legal Publishing. San Francisco Business and Tax Regulations Code SEC 953.20 – Gross Receipts Tax Applicable to Category 1 Business Activities Other cities use flat annual fees, per-employee charges, or simpler percentage-of-revenue formulas, and a business in multiple cities has to track each one separately.
Local Property Tax and What Gets Added to It
Property tax is the single largest local tax most Californians pay, and it reaches every homeowner and commercial owner in the state. Counties collect it and distribute the proceeds among cities, school districts, and special districts.
Two hard limits set by Proposition 13 shape the whole system. The base property tax rate cannot exceed 1% of assessed value, and the assessed value cannot rise more than 2% per year regardless of market movement.3California Legislative Information. California Constitution Article XIII A The assessed value resets to market value only when the property changes hands or new construction is completed; until then, the county assessor applies just the annual 2% inflation adjustment.4California State Board of Equalization. Publication 800-10 – How Property Is Assessed for Property Tax Purposes A homeowner who bought 20 years ago may be paying taxes on a value far below current market.
Your actual bill almost always runs above 1%. Voter-approved bond measures for schools, libraries, parks, and infrastructure sit on top of the base rate and are exempt from the 1% cap. They commonly push the effective rate to 1.1% or 1.25% of assessed value, sometimes higher.
Many newer developments also carry Mello-Roos assessments: special taxes levied inside Community Facilities Districts to pay for public facilities and services in a specific area.5California Legislative Information. California Government Code 53321 These are not based on the property’s value; they’re calculated on lot size or structure type. In some subdivisions, Mello-Roos adds $3,000 to $8,000 a year on top of the regular tax bill, and it’s not capped by Proposition 13. Always check whether a home you’re buying sits in a Mello-Roos district before assuming the tax will be near 1% of the purchase price.
One small item in your favor: owner-occupied homes qualify for a $7,000 reduction in taxable value under the California Constitution. At the 1% base rate, that saves roughly $70 a year. The property must be your principal residence as of January 1, and you apply through your county assessor’s office.6California State Board of Equalization. Homeowners Exemption
Sales Tax Varies by Address
The sales tax rate you pay depends on exactly where the sale happens. The state sets a floor of 7.25%, which already includes both the state general fund rate and a uniform local allocation.7California Department of Tax and Fee Administration. Know Your Sales and Use Tax Rate On top of that, cities and counties add voter-approved district taxes for transportation, public safety, schools, and other local priorities.
District rates range from 0.10% to 2.00%, and more than three-quarters of California businesses operate where at least one district tax applies.8California Department of Tax and Fee Administration. California City and County Sales and Use Tax Rate Information District boundaries don’t always follow city lines, so neighboring towns can charge noticeably different rates. Lancaster and Palmdale currently charge 11.25%, while dozens of cities in the Bay Area and Los Angeles County sit at 10.75%.9California Department of Tax and Fee Administration. California Sales and Use Tax Rates by County and City A few rural areas with no district taxes charge only the 7.25% floor.
Businesses carry the compliance burden. They must charge the correct rate based on where each sale originates, not where the buyer lives, and the California Department of Tax and Fee Administration audits for errors.
Transfer Tax When Real Estate Changes Hands
Selling property triggers a documentary transfer tax, separate from property tax and typically paid by the seller at closing. The base county rate is $1.10 per $1,000 of sale price. Cities within a county can add their own transfer tax, with a credit so county and city amounts don’t fully stack.10California Legislative Information. California Revenue and Taxation Code 11911
For most California home sales, this comes to a few hundred dollars. In a handful of cities, though, voter-approved transfer taxes dwarf the statutory rate. Los Angeles voters approved Measure ULA in 2022, which adds 4% on sales over $5.3 million and 5.5% on sales at $10.6 million or above.11City of Los Angeles Department of Finance. Real Property Transfer Tax and Measure ULA FAQ San Francisco uses a tiered rate from 0.5% to 6% at the top. Oakland charges $10 to $25 per $1,000 depending on sale price, and Berkeley reaches $25 per $1,000 on sales above $1.6 million.12CaliforniaCityFinance.com. California City Documentary and Property Transfer Tax Rates In those cities, transfer tax can run into tens of thousands of dollars and belongs in your closing-cost math.
Hotel, Utility, and Parcel Taxes
California Revenue and Taxation Code Section 7280 lets any city or county levy a transient occupancy tax on stays of 30 days or less in hotels, motels, and similar lodging.13California Legislative Information. California Revenue and Taxation Code 7280 Rates are set locally and commonly fall between 8% and 14%. Most jurisdictions now extend the tax to short-term rentals booked through platforms like Airbnb and Vrbo, with the host required to register, collect, and remit. Some cities also require a separate short-term rental certificate before you can list a property.
Many cities charge a utility user tax on electricity, gas, water, and sometimes telecommunications bills. Rates range from 1% to 11%, with roughly 5% being common.14CaliforniaCityFinance.com. Utility User Tax Facts Not every city imposes one, and the specific utilities covered vary. Because it’s rolled into your utility bill, it’s easy to miss, but at 5% to 7% on a substantial monthly bill it adds up.
A parcel tax is a flat annual charge on each parcel of property, independent of value. School districts are the most common users, though cities and special districts use them for police, fire, library, and other services. Passing a new parcel tax requires a two-thirds supermajority of voters in the affected district.15California Legislative Information. California Constitution Article XIII C SEC 2 Measures often include exemptions for seniors or low-income homeowners who apply. Amounts range from under $100 a year in smaller districts to several hundred in urban areas.
How These Taxes Hit Your Federal Return
If you itemize on your federal return, several of the taxes above are deductible under the state and local tax (SALT) deduction: property tax, state income tax, and local sales tax. For 2026, the SALT cap is $40,400, or $20,200 for married filing separately.16Office of the Law Revision Counsel. 26 USC 164 – Taxes
California residents hit the cap easily. Between state income tax rates that reach 13.3% at the top bracket and property taxes on even modestly valued homes, many households max out before local sales tax enters the picture. The cap phases down for taxpayers with modified adjusted gross income above $505,000, shrinking by 30 cents per dollar over the threshold, though it never drops below $10,000.16Office of the Law Revision Counsel. 26 USC 164 – Taxes The $40,400 limit rises 1% annually through 2029, then reverts to $10,000 for 2030 and beyond unless Congress acts.
Hotel taxes, utility user taxes, and Mello-Roos assessments generally are not deductible as state and local taxes for federal purposes, so they’re a purely out-of-pocket cost. Business license and gross receipts taxes are usually deductible as business expenses rather than through the SALT deduction, which changes how they’re reported.