California Use Tax Information
Many smart shoppers can find bargains online, but don't realize they can incur a tax bill in the process. California law requires tax on in-state purchases, and also requires tax on items purchased out-of-state for use in California.
How to Pay Use Tax
If you have a California seller's permit, you must pay the use tax due on business related purchases with your sales and use tax return in the period when you first used, stored, or consumed the item in California. Report the amount of your purchase under “Purchases subject to use tax,” (line 2) on the return.
If you are a “qualified purchaser,” you must pay your use tax due by filing your return for the previous calendar year by April 15.
If you are not required to have a seller's permit or a use tax account you must pay use tax in one of the following ways.
The easiest way to report and pay the use tax is on your California state income tax return. Follow the instructions included with your income tax return. Complete the worksheet included in those instructions to determine the amount of your use tax liability. As part of reporting use tax on the State Income Tax Return, you may also choose to use a Use Tax Lookup Table.
- Pay Use Tax directly to the State Board of Equalization by using the BOE's electronic registration system;
“Qualified purchasers” under Revenue and Taxation Code section 6225 are business operations that must register with BOE to report and pay use tax owed. A "qualified purchaser" means a person that meets all of the following conditions:
- The person receives at least $100,000 in gross receipts from business operations per calendar year. Note: Gross receipts are the total of all receipts from both in-state and out-of-state business operations
- The person is not required to hold a seller's permit or certificate of registration for use tax (under section 6226 of the Revenue and Taxation Code)
- The person is not a holder of a use tax direct payment permit as described in section 7051.3 of the Revenue and Taxation Code
- The person is not otherwise registered with the BOE to report use tax
Sales Tax vs. Use Tax: What’s the Difference?
Tax collected by the retailer here in California is called sales tax, and the retailer is responsible for reporting and paying the tax to the state. When an out-of-state or online retailer doesn't collect the tax for an item delivered to California, the purchaser may owe "use tax," which is simply a tax on the use, storage, or consumption of personal property in California.
Items that are exempt from sales tax are exempt from use tax as well. Use tax liabilities are often created by internet or mail order purchases with out-of-state retailers not required to collect the tax. Be sure to review your receipts from Internet and other out-of-state purchases to determine if tax was charged.
Why Is There a Use Tax?
The use tax, which was created in July 1935, is a companion to California's sales tax that is designed to level the playing field between in-state retailers who are required to collect tax, and some out-of-state retailers who are not. Use tax, just like sales tax, goes to fund state and local services throughout California.
What Kinds of Purchases Are Taxable?
For questions on whether a purchase is taxable read the California Use Tax Information, or call our Information Center at 800-400-7115 or TTY/TDD 800-735-2929.
How Do I Find My Local Tax Rate?
You can look up your local sales and use tax rate.
Vehicles, Vessels, And Aircraft
If you have questions on how to report and pay use tax on the purchase of vehicles, vessels, and aircraft, see California Use Tax Information available online or refer to Publication 79, Documented Vessels and California Tax, or Publication 79-A, Aircraft and California Tax. The use tax due on these purchases cannot be reported on your California state income tax return.
Cigarette and Tobacco Products
If you are registered with the Board of Equalization as a cigarette and/or tobacco products consumer, your purchases of cigarette and tobacco products may not be reported on your sales and use tax return. If you need additional information, contact the Excise Taxes Division at 916-327-4208.
Generally, use tax also applies to foreign purchases of tangible personal property brought into California for storage, use, or other consumption. More information about items brought into California through U. S. Customs is available online.