The California Board of Equalization ("Board") recently released a special notice on sales paid for with virtual currency.

Virtual currencies include Bitcoin, Litecoin, Dogecoin, and Peercoin. California sales tax applies to sales paid for with virtual currency the same way it applies to sales paid for with traditional currency.

The Internal Revenue Service does not consider virtual currency to be legal tender. California therefore treats sales paid for with virtual currency as sales paid for by barter or exchange. The tax base is generally the retailer's advertised selling price. Retailers should keep records on the price for which they regularly sell the same or similar property when payment is made in United States dollars.

The Board does not accept virtual currency as payment for taxes.

http://www.boe.ca.gov/news/2014/l382.pdf