Publication 110, California Use Tax Basics
- Use Tax Basics
- Paying Use Tax
- Additional Information
California’s sales tax generally applies to the sale of merchandise, including vehicles, in the state. The state’s use tax applies to the use, storage, or other consumption of those same kinds of items in California. While use tax was originally put in place to protect California merchants from unfair out-of-state competition, it also applies to certain purchases made within the state.
When does use tax apply?
Use tax generally applies when you buy merchandise that will be used, stored, consumed, or given away in this state, under certain circumstances.
Use tax is based on an item’s purchase price and generally applies to:
- California consumer or retailer purchases from out-of-state vendors (including foreign merchants) who do not collect California tax on their sales (see Note, below) unless the purchase is otherwise subject to an exemption or exclusion.
- Retailer’s use of items purchased under a resale certificate, including: withdrawing items from inventory for personal or business use, using an item before sale, or using an item in manufacturing unless it becomes a physical part of the final product sold. Demonstrating or displaying an item is generally not a taxable use provided the item remains for sale.
- Purchases of vehicles, vessels, mobile homes, and aircraft from sellers who do not hold seller’s permits. For more information, please refer to our related publications (see Additional Information), or call our Taxpayer Information Section at 800-400-7115 or our Consumer Use Tax Section at 916-445-9524.
Note: Special use tax rules apply to purchases by insurance companies (see Regulation 1567, Banks and Insurance Companies) and to the use of heavy trucks and trailers (see Regulation 1661, Leases of Mobile Transportation Equipment).
Exemption for items purchased in a foreign country
The first $800 of tangible personal property that is both purchased from a retailer in a foreign country by an individual and personally hand–carried into this state from the foreign country within any 30-day period is exempt from use tax. This exemption does not apply to property sent or shipped to this state.
Note: This publication summarizes the law and applicable regulations in effect when the publication was written, as noted above. However, changes in the law or in regulations may have occurred since that time. If there is a conflict between the text in this publication and the law, the decision will be based on the law and not on this publication.
Generally, when you buy an item that is used, stored, consumed, or given away in California you owe use tax. In some cases, sellers must collect use tax from their customers and pay it to the Board of Equalization (BOE).
- California seller’s permit
If you hold a seller’s permit, you must pay use tax when submitting your sales and use tax return. Report the amount of your purchase under "Purchases subject to use tax" on the return for the period that includes the date when you first used, stored, or consumed the item in California. When you obtain your seller»s permit, you will be instructed to eFile your tax return on a monthly, quarterly, or annual reporting basis. Your tax return and payment are due after the close of each reporting period. For example, if you are on a fiscal year reporting basis, your reporting period closes on June 30, your tax return and payment are due on July 31, the last day of the following month.
- Required registration to report use tax
California law requires a "qualified purchaser" to register with the BOE and annually report and pay use tax directly to the BOE. Reporting and paying the use tax is done through our eFiling system. A " qualified purchaser" includes any business with at least $100,000 in annual gross receipts from business operations. Gross receipts are the total of all receipts from both in-state and out-of-state business operations. A "qualified purchaser" is required to file a return, and report and pay use tax on the total purchase price of tangible merchandise that is subject to use tax during the preceding calendar year, and for which tax was not paid to a retailer required to collect the use tax. The return along with payment is due by April 15 of the following calendar year. For example, the return for 2011, along with payment, is due by April 15, 2012.
For additional information, see publication 126, Mandatory Use Tax Registration for Service Enterprises, available from our website at www.boe.ca.gov.
- California income tax return
If you do not hold a permit with the BOE for paying your use tax as described above, you may report and pay use tax to the Franchise Tax Board (FTB) on your California income tax return. A Use Tax Table is included with the instructions for the FTB income tax return; it is a tool to assist you in reporting use tax when filing your annual income tax return. The Use Tax Table is only used for personal purchases less than $1,000, not for business purchases. Business purchases subject to use tax should be reported using actual business purchase receipts. The due date for use tax is the same as the due date for your state income tax return. The date the use tax liability was incurred must be within the tax year being reported on your state income tax return. The FTB will forward the use tax collected to the BOE. If you are a "qualified purchaser" you are required to register with the BOE to report and pay use tax.
- Consumer use tax account
If you make frequent taxable purchases from out–of–state sellers and are not required to register for a use tax account as a qualified purchaser, you may register with us and obtain a consumer use tax account. You can apply online for a permit or license using eRegistration (eReg) available on our website at www.boe.ca.gov. eReg is also available in our field offices. Please contact our Taxpayer Information Section for assistance at 800-400-7115.You will be provided an account number and the ability to eFile your return. You will be notified whether you must file your consumer use tax return on a monthly, quarterly, or annual basis. Your tax return and payment are due after the close of each reporting period. For example, if you are on a fiscal year reporting basis, your reporting period closes on June 30. Your tax return and payment is due on July 31, the last day of the following month.
- Vehicles, vessels, and aircraft
Special rules and reporting requirements apply to these purchases. Please see Regulation 1610, Vehicles, Vessels and Aircraft, publication 52, Vehicles and Vessels: How to Request a Use Tax Clearance for DMV Registration, publication 79, Documented Vessels and California Tax, and publication 79A, Aircraft and California Tax, or call our Taxpayer Information Section at 800-400-7115.
If you do not have a sellerís permit and are not required to register for a use tax account as a "qualified purchaser," you may report the purchases subject to use tax using eRegistration (eReg) available on our website at www.boe.ca.gov. eReg is also available in our field offices. Please contact our Taxpayer Information Section for assistance at 800–400–7115.If you are reporting and paying use tax using eReg, the tax payment is due by January 31 of the year following the calendar year in which the use tax liability was incurred. Penalty and interest applies to payments received after the due date.
What can I do if I owe use tax for prior years?
The In–State Voluntary Disclosure Program may benefit purchasers who are not required to have a seller’s permit, but have a use tax liability. If you owe use tax for periods prior to the current reporting year, you should review this program. Information is available on the BOE website, www.boe.ca.gov, by searching "in–state voluntary disclosure."
What tax rate applies?
Please see publication 71, California City and County Sales and Use Tax Rates, and publication 44, District Taxes. Special use tax rules for railcars, heavy trucks, and similar equipment are also found in publication 44.
These general guidelines do not address exemptions or exclusions that may apply in specific situations.
|Use Tax — When does it apply? How do you pay it?|
|Type of Taxable Transaction or Circumstance of
Use, Storage, or Consumption
|Reporting the Sale or Purchase
and Paying the Use Tax Due
|If you are a California business with a seller’s permit|
|Taxable lease||If you are the lessor: Collect use tax from purchaser; report lease payments in "total sales" on sales and use tax return; pay tax with return. If you are the lessee: pay tax to the lessor. Note: you may owe the tax if the lessor doesn’t collect it.|
|Taxable use, storage, or consumption of an item in California purchased without the payment of California tax (see "When does use tax apply?")||Report purchase on return as "purchase subject to use tax" and pay tax. You may be able to take a credit if you paid another state’s sales or use tax (see return instructions).|
|If you are a seller located in another state|
|Taxable sale to California customer, if you are engaged in business in California (have location or representative in California or otherwise have nexus within California).||You must register, collect use tax from customers, and pay the tax to the BOE with your tax return (see Regulation 1684, Collection of Use Tax by Retailers).|
|Taxable sale to California customer if you are not engaged in business in California.||You may voluntarily register to collect and pay use tax. If you do not, your customer must pay it to us.|
|If you are a California resident who is not required to hold a seller’s permit|
|Registered "qualified purchaser" with a use tax account.||Report purchases subject to use tax on your use tax return. You may be able to take a credit if you paid another state’s sales or use tax (see return instructions).|
|Purchase of merchandise, the sale of which is otherwise subject to tax from an out-of-state retailer (including foreign merchant) who does not collect California sales or use tax.||You may report and pay use tax on your California income tax return or you may report the purchases subject to use tax using eRegistration (eReg) available on our website at www.boe.ca.gov. eReg is also available in our field offices. Please contact our Taxpayer Information Section for assistance at 800-400-7115.Unless you are required to register or are registered as a "qualified purchaser" with a use tax account). You may be able to take a credit if you paid another state’s sales or use tax. If you make recurring taxable purchases, you may wish to obtain a consumer use tax account.|
|Purchase from private party of vehicle, undocumented vessel (registered with DMV), documented vessel (registered with US Coast Guard), aircraft, or mobile home.||Pay tax to DMV (vehicles, undocumented vessels); to the BOE (documented vessels, aircraft); to a registered broker (documented vessels, aircraft); or to state Department of Housing and Community Development (mobilehomes).|
Taxpayer Information Section
Additional information and all BOE forms, publications and regulations are available from our website or by calling our Taxpayer Information Section at 800-400-7115.
|46||Leasing Tangible Personal Property|
|52||Vehicles and Vessels: How to Request a Use Tax Clearance for DMV Registration|
|61||Sales and Use Taxes: Exemptions and Exclusions|
|71||California City and County Sales and Use Tax Rates|
|79||Documented Vessels and California Tax|
|79A||Aircraft and California Tax|
|105||District Taxes and Delivered Sales|
|123||California Businesses: How to Identify California Use Tax Due|
|126||Mandatory Use Tax Registration For Service Enterprises|
|1567||Banks and Insurance Companies|
|1661||Leases of Mobile Transportation Equipment|
|1684||Collection of Use Tax by Retailers|
|1685||Payment of Tax by Purchasers|
|1686||Receipts for Tax Paid to Retailers|
|1823||Application of Transactions (Sales) Tax and Use Tax|
|1827||Collection of Use Tax by Retailers (district taxes)|