On April 1, 2015, a number of East Bay Cities increased their sales tax to raise additional revenue for city services. Hayward, San Leandro, Union City and El Cerrito are the first to reach the 10% threshold. Both Alameda County and El Cerrito received special legislative permission to seek voter approval to boost local sales tax 2.5 points above the 7.5 percent set by the state. Without permission, state law currently limits local governments from adding more than 2% to the state sales tax. Now, a bill in the legislature would increase the cap statewide to 3% thereby allowing every city in the state to ask their voters to increase the sales tax above 10%.

It was recently pointed out that on a million dollar "hard-money" project with roughly 40% in material costs, the difference of one half of one percent sales tax could be several thousand dollars.

Please remember that there is a general fixed price contract exemption contained in the Transactions and Use Tax Law for purposes of exempting all fixed price contracts from the various city and county tax rate increases when those contracts are entered into prior to the operative date of those rate increases (see Revenue and Taxation Code Sections 7261(g) and 7262(f)).

If you have lump-sum jobs in any of the areas listed above as well as Richmond, Pinole, Albany, and Union City, be sure to see if your circumstances qualify for the exemption. You should also keep this on your radar going forward, especially if the cap is increased. (Taken from Contra Costa NECA Newsletter, April 2015.)