Struggling California retailers face a temporary one cent sales tax increase as part of a deal to close the state's $42 billion budget deficit and break a 14-week legislative deadlock. The sales tax boost would be combined with a 5 percent surcharge on personal income tax, an increased gasoline levy and higher fees, as well as widespread spending cuts. The taxes would expire in two years, but voters could choose to extend them.

However, corporations that don't have out-of-state facilities would receive a tax break. They would have the option of changing how they calculate their state taxes, choosing to be taxed on sales only, instead of a formula based on size of payroll, sales and California property they own.

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California’s bond rating has fallen to last place nationally, which means the state is unable to easily borrow money to operate. State government workers are being furloughed without pay for two days a month, bridge and road construction has been halted and funds for schools and universities have been cut. The state has suspended tax refunds and payments to vendors. The unemployment rate is 9.3 percent.

The sales tax would rise to 9.75 percent in Los Angeles County, 8.75 percent in San Diego and 9.5 percent in San Francisco, which is considering another half-cent increase to close an estimated $576 million city budget deficit.