Payment Fundamentals - 1901.1

(Revised: 02/2022)

Basic Requirements

Payment shall not be processed or released to any supplier for any goods and/or services without having in its possession all of the following:

• A properly authorized purchase document.
• Documentation verifying the goods/services were satisfactorily received and/or performed.
• An accurate and correct supplier invoice.

Required Payment Date

State departments granted purchasing authority are expected to establish procedures and adhere to the provisions of the California Prompt Payment Act (Government Code, Section 927 et seq).

Payments to supplier are to be made in accordance with the provisions of the California Prompt Payment Act.  The Act requires departments (unless expressly exempted by statute) to pay properly submitted, undisputed invoices, refunds or other undisputed payments due not more than forty-five (45) days after:

• The date of acceptance of goods or performance of services; or
• Receipt of an undisputed invoice, whichever is later.

If the requirement is not met, state departments must automatically calculate and pay the appropriate late payment penalties as specified in Government Code, Section 927, et seq.

Click here to access the Prompt Program Program.

The withheld amount pursuant to MVC, Section 999.7 and SCM Vol. 2, Section 1203.1 is not subject to late payment penalties under the Prompt Payment Act.

Allocation of Payment Approval Process Time

Thirty (30) of the forty-five (45) calendar days allowed to pay invoices are allocated to a department’s payment approval process. The remaining fifteen (15) calendar days are allocated to the State Controller’s Office (SCO) claim audit and warrant generation process.

However, if a department elects to pay an invoice using the revolving fund process in order to take advantage of discounts or to avoid accruing late payment penalties, then the department can use the entire 45 day period.

Administrative Fee/Billing

Department of General Service, Procurement Division (DGS/PD) charges each department an administrative fee for use of most purchasing authority transactions and categories (competitive bids, LPAs, NCB, etc.) based on the value of each purchase document.  In most cases, DGS/PD may bill directly or rely on the contractor to collect the fee.  Individual LPA contracts will describe any administrative fees associated with using the contract and how the fee will be collected.

IT transactions which are unusually complex in nature will be billed at an hourly rate.  These include, preparation and evaluation of solicitations, contract negotiations, benchmark/equipment demonstrations, consultation at all levels of the procurement process, issuance of purchase orders and contracts for equipment, software or services, contract review and all NCB reviews.

DGS Price Book

DGS/PD publishes a price book and directory of services that provides a listing of the services provided and prices charged by DGS.

Click here to access the DGS Price Book and Directory of Services.

Determining Tax on Purchases

The State does not pay federal taxes on purchases, only State sales tax and/or use tax.  Taxes are assessed based upon where the products are physically received; therefore, it is recommended that a copy of the latest California Sales and Use Tax rate chart by county be obtained.  This chart can be found on the California Department of Tax and Fee Administration’s (CDTFA) web page.

Click here for further information on the California Department of Tax and Fee Administration.

Maintenance Sales Tax

The CDTFA has ruled, in accordance with Regulation 1502 (IT) and 1546 (non-IT goods) of the Sales and Use Tax Regulations of the Business Taxes Law Guide, some supplies are taxable. See Regulation 1502, 1546 or contact CDTFA for additional information.

Click here to access Regulation 1502 (IT) and 1546 (non-IT Goods).