On April 1, 2025, Los Angeles County raised its sales tax from 9.5% to 9.75% after voters approved Measure A in the November election. The increase was designed to generate new funding for homelessness prevention, housing programs, and mental health services across the county.
While LA’s new base rate is among the highest in California and slightly above many large counties nationwide, it reflects a community decision to invest in public priorities.
For small business owners, this still means updating systems, staying compliant with California’s sales tax rules, and understanding how a seemingly small change can affect daily operations. Here is what the new rate means for your business and what steps to take to stay on track.
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How the 9.75% Sales Tax Affects Small Businesses
A quarter of a percent may seem small, but it adds up across high volumes of sales. For a business that processes hundreds or thousands of taxable transactions each month, this rate change can impact pricing, customer perception, and administrative processes.
Here are the main ways small businesses will feel the change:
- Transaction adjustments
Every taxable sale must now be charged at the updated rate. Even small undercharges can create liabilities when it comes time to remit to the CDTFA. - Pricing decisions
Some owners may choose to absorb the increase, while others will adjust prices so customers see the full rate applied. - Cash flow considerations
Higher collections mean holding more funds in trust for the state. Businesses must manage these funds carefully to avoid using them for operating expenses. - Multi-location complexity
Businesses operating in cities with additional district taxes must be extra careful. Selling in Lancaster or Palmdale, for example, means collecting at 10.25 percent rather than 9.75 percent.
The goal is not just to apply the correct rate, but to integrate it seamlessly into your daily operations so that errors do not accumulate over time.
Avoiding Sales Tax Pitfalls and Staying Compliant
The CA Department of Tax and Fee Administration (CDTFA) keeps a close eye on sales tax compliance, and even small errors can trigger an audit. The good news is that the same actions that prevent mistakes will also strengthen your compliance process. Below are common problem areas for LA County businesses, paired with steps to address them.
Outdated systems
Using the old 9.5 percent rate in your point-of-sale software, online checkout, or invoicing templates may result in undercollection of tax. This can lead to unexpected liabilities when you file or when CDTFA compares your reported sales against expected collections.
Update every sales platform, in-store and online, to the current rates. Test transactions to confirm the correct amount is applied before going live.
Incorrect tax application
Applying tax to exempt goods or missing it on taxable ones skews your reports and can create a mismatch between your filings and CDTFA’s expectations.
Hence, you must provide your staff with a simple reference guide that lists taxable and non-taxable items under California law. Spot-check receipts weekly to catch errors early.
Late filings or payments
Missing even one CDTFA deadline results in automatic penalties and interest, and repeat lateness can trigger closer scrutiny.
Fix: Set recurring reminders in multiple places (calendar, POS system alerts, accounting software) based on your filing frequency — monthly, quarterly, or annually.
Poor documentation for exempt sales
Missing or expired resale certificates can cause CDTFA to treat exempt sales as taxable, which means you’ll pay the tax yourself. To avoid this, you can store resale certificates in digital and paper form. Also, schedule an annual review to replace expired documents before they cause problems.
Overlooking city-specific rates
The base LA County rate is 9.75 percent, but cities like Lancaster and Palmdale are at 10.25 percent. Charging the wrong rate in the wrong city leads to underpayment and a gap you have to cover.
We advise using CDTFA’s tax rate lookup tool before selling in any new location. If you operate in multiple jurisdictions, create a rate chart for your staff and ensure your POS system is location-aware.
Avoiding these mistakes comes down to having accurate systems, well-trained staff, and a process for double-checking filings before they go out.
When to Work With a Tax Attorney in Los Angeles
Most small business owners can handle routine sales tax filings with the help of an accountant or bookkeeper. However, there are situations where legal representation is the smarter choice. An LA tax attorney can help you navigate complex state rules, negotiate with the CDTFA, and protect your business from unnecessary financial damage.
Consider working with a tax attorney if:
- You have fallen behind on filings or payments and need to resolve outstanding liabilities
- You have received a Notice of Determination or an audit notification from the CDTFA
- Your business has been applying the wrong rate, and you may owe back taxes
- You operate in multiple cities or districts with different rates and want to ensure compliance
- You are facing penalties and want to explore options for reduction or abatement
- You are in a high-risk industry, such as cannabis, hospitality, or cash-based retail, where audits are more frequent
You should check this Los Angeles tax attorney for a free consultation if you need any assistance with the CDTFA.
Staying Ahead of the Change
If your business operates in LA County, confirm your systems are updated to the 9.75 percent rate and that you are charging correctly in every city you serve. Keep accurate records, train your staff, and double-check filings before they go out.
Sales tax compliance is not only about avoiding penalties. It is about keeping your business running smoothly and building trust with customers. Staying proactive now means fewer problems later and more time to focus on growing your business.
