Calif. businesses prep for sales tax change

June 30, 2011 3:49:00 PM PDT
Rich Daly, owner of San Jose's 4th Street Pizza, just printed a new batch of menus about three weeks ago. He charges oddball numbers like $3.20 for a slice of pepperoni so the price rounds up to an even $3.50 with the state sales tax. Starting Friday, though, he'll have to hand back four pennies because the same slice will cost $3.46 when California reduces the sales tax by 1 percent. The change was part of the new state budget signed by Gov. Jerry Brown earlier today.

Pennies add up. The 1 percent reduction will take away $4.5 billion from state tax revenue, but to put it another way, it will put $4.5 billion back into the hands of consumers.

Car dealers say consumers have figured out they should hold off a major purchase until the change takes effect Friday. Sales manager Charston Mussman at Piercy Toyota in Milpitas showed ABC7 a SUV that will be about $400 cheaper Friday.

"And you don't have to negotiate for that," Mussman chuckled.

Of course, the sales tax reduction also means computerized cash registers have to be reprogrammed after the close of business Thursday night. 4th Street Pizza's Rich Daly says it will take him about 20 minutes to do a software update, but he will also have to do some changes in his accounting system as well.

The sales tax is a major source of revenue for state and local government. In the 2009-2010 fiscal year, which ended one year ago, the state collected $42.2 billion in sales taxes. The sales tax rate will drop to 8.25 percent in Santa Clara County, 8.5 percent in San Mateo County and Santa Cruz counties amd Oakland's new rate will be 8.75 percent.

Ever wonder where those tax dollars go? The State Board of Equalization says 6 percent goes to the state's general fund, 0.25 percent to repay economic recovery bonds, 0.5 percent for a local public safety fund, 0.5 percent to support health and social service programs and 1 percent to fund transportation and county and county operations.

We'll have more on this developing story later today online and on ABC7 News at 4 and 6.

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