Merchant Services in California
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What a California business needs to know before taking card payments: the state sales tax rate, what the law says about card surcharges, and what it costs to form an LLC. Every figure below comes from an official California page or statute and links to it. Checked 2026-10-16.
California at a glance
| Item | What we found | Source |
|---|---|---|
| State sales tax base rate | 7.25% | Official source |
| Card surcharge rule | Prohibited by statute | Official source |
| LLC formation fee | $70.00 | Official source |
| LLC recurring fee | $800.00 every year | Official source |
| Wage income tax | Up to 13.3% | Official source |
Card surcharges in California
What the statute says
California Civil Code section 1748.1(a) says no retailer in a sales, service or lease transaction with a consumer may impose a surcharge on a cardholder who elects to use a credit card in lieu of cash, check or similar means. A retailer may offer discounts for paying another way if the discount is offered to all prospective buyers. Subsection (b) makes a retailer who willfully violates it liable to the cardholder for three times actual damages if it does not repay the amount within 30 days of a written demand.
California's law does not let a seller add a surcharge when a customer pays by card, so a surcharge is not an option here. The statute does not stop you from offering a discount for another way of paying: a discount is treated differently from a surcharge in the California text above. If you want to pass on card costs, price the card amount as your normal price and offer a lower price for cash, and ask your processor and a lawyer how to display it.
Worked example: a $100 card sale
Using a published online card rate of 2.9% + $0.30 (Stripe, checked 2026-10-15), a $100 sale costs you $3.20 to process.
| Your card cost | $3.20 |
|---|---|
| Visa's limit for credit cards (lower of your cost or 3%) | $3.00 |
| California's limit | No surcharge allowed |
| Most you could add on this sale | $0.00 |
| Share of your card cost that covers | 0% |
Visa's own rule: Visa's Q&A says U.S. merchants may surcharge credit cards (not debit or prepaid) up to the merchant discount rate for the card or 3%, whichever is lower, must disclose it as a merchant fee at the point of entry, point of sale or checkout and on the receipt, and must notify their acquirer at least 30 days before starting.
This is arithmetic from published rules, not legal advice. Visa's rules apply to credit cards only (not debit or prepaid), require disclosure, and require notice to your processor before you start. Ask your processor before you surcharge.
See the surcharge laws for all states ·Try the surcharge calculator
Sales tax in California
The state base rate is 7.25%, which we read on the official page (The statewide tax rate is 7.25%.). That is the 46 lowest of the 46 states whose base rate we have verified. On a $100 purchase the state tax is $7.25; on a $1,250 purchase it is $90.63.
California describes 7.25% as the statewide rate; districts add more.
Local taxes may apply on top of the state rate, and the exact rate depends on the address.
Forming an LLC in California
The state filing fee for an LLC is $70.00, which is the 11 lowest of the 48 states whose formation fee we have verified.
Online only. The Secretary of State lists a $20 Statement of Information due every two years.
After that, California charges $800.00 every year (annual llc tax (franchise tax board)), so the state fees in the first year are about $870.00.
The Secretary of State also requires a Statement of Information with its own fee, and the FTB lists an extra fee for LLCs with higher income.
California filing office ·How to start an LLC
Paying employees in California
California taxes wages with graduated rates, topping out at 13.3%.
As a rough estimate, a single employee paid $2,000 every two weeks would have about $50.87 of California income tax withheld per paycheck. This is an estimate and does not include credits or local taxes.
Estimate: state rates per Tax Foundation 2026; check with California.
What this means for a California business
Plan on absorbing card fees or building them into your prices. A card surcharge is off the table in California.
Frequently asked questions
Can I add a credit card surcharge in California?
No. California's statute prohibits it. Ask your payment processor and a lawyer before changing how you price card payments.
What is the sales tax in California?
The state base rate is 7.25%. Local taxes may apply.
How much does it cost to form an LLC in California?
The state filing fee is $70.00.
Other state pages
We publish a state page only when the sales tax rate, the LLC formation fee and the surcharge rule are all verified from official sources.