Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2011
 

Sales And Use Tax Regulations

Article 17. Payment and Collection of Use Tax

Sales And Use Tax Regulations

Article 17. Payment and Collection of Use Tax

Regulation 1684. Collection of Use Tax by Retailers.

Reference: Sections 6203, 6204, 6226, and 7051.3, Revenue and Taxation Code.

Section 513(d)(3)(A), Internal Revenue Code (26 USC).

(a) RETAILERS ENGAGED IN BUSINESS IN STATE. Retailers engaged in business in this state as defined in Section 6203 of the Revenue and Taxation Code and making sales of tangible personal property, the storage, use, or other consumption of which is subject to the tax must register with the Board and, at the time of making the sales, or, if the storage, use or other consumption of the tangible personal property is not then taxable, at the time it becomes taxable, collect the tax from the purchaser and give the purchaser a receipt therefor.

Any retailer deriving rentals from a lease of tangible personal property situated in this state is a "retailer engaged in business in this state" and is required to collect the tax at the time rentals are paid by his lessee.

The use of a computer server on the Internet to create or maintain a World Wide Web page or site by an out-of-state retailer will not be considered a factor in determining whether the retailer has a substantial nexus with California. No Internet Service Provider, On-line Service Provider, internetwork communication service provider, or other Internet access service provider, or World Wide Web hosting services shall be deemed the agent or representative of any out-of-state retailer as a result of the service provider maintaining or taking orders via a web page or site on a computer server that is physically located in this state.

A retailer is not "engaged in business in this state" based solely on its use of a representative or independent contractor in this state for purposes of performing warranty or repair services with respect to tangible personal property sold by the retailer, provided that the ultimate ownership of the representative or independent contractor so used and the retailer is not substantially similar. For purposes of this paragraph, "ultimate owner" means a stock holder, bond holder, partner, or other person holding an ownership interest.

(b) CONVENTION AND TRADE SHOW ACTIVITIES. For purposes of this subdivision, the term "convention and trade show activity" means any activity of a kind traditionally conducted at conventions, annual meetings, or trade shows, including, but not limited to, any activity one of the purposes of which is to attract persons in an industry generally (without regard to membership in the sponsoring organization) as well as members of the public to the show for the purpose of displaying industry products or to stimulate interest in, and demand for, industry products or services, or to educate persons engaged in the industry in the development of new products and services or new rules and regulations affecting the industry.

Except as provided in this paragraph, a retailer is not "engaged in business in this state" based solely on the retailer's convention and trade show activities provided that:

(1) For the period commencing on January 1, 1998 and ending on December 31, 2000, the retailer, including any of his or her representatives, agents, salespersons, canvassers, independent contractors, or solicitors, does not engage in those convention and trade show activities for more than seven days, in whole or in part, in this state during any 12-month period and did not derive more than ten thousand dollars ($10,000) of gross income from those activities in this state during the prior calendar year;

(2) For the period commencing on January 1, 2001, the retailer, including any of his or her representatives, agents, salespersons, canvassers, independent contractors, or solicitors, does not engage in those convention and trade show activities for more than fifteen days, in whole or in part, in this state during any 12-month period and did not derive more than one hundred thousand dollars ($100,000) of net income from those activities in this state during the prior calendar year.

A retailer coming within the provisions of this subdivision is, however, "engaged in business in this state," and is liable for collection of the applicable use tax, with respect to any sale of tangible personal property occurring at the retailer's convention and trade show activities and with respect to any sale of tangible personal property made pursuant to an order taken at or during those convention and trade show activities.

(c) RETAILERS NOT ENGAGED IN BUSINESS IN STATE. Retailers who are not engaged in business in this state may apply for a Certificate of Registration—Use Tax. Holders of such certificates are required to collect tax from purchasers, give receipts therefor, and pay the tax to the Board in the same manner as retailers engaged in business in this state. As used in this regulation, the term "Certificate of Registration—Use Tax" shall include Certificates of Authority to Collect Use Tax issued prior to September 11, 1957.

(d) USE TAX DIRECT PAYMENT PERMIT EXEMPTION CERTIFICATES. Notwithstanding subdivisions (a) and (b), a retailer who takes a use tax direct payment exemption certificate in good faith from a person holding a use tax direct payment permit is relieved from the duty of collecting use tax from the issuer on the sale for which the certificate is issued. Such certificate must comply with the requirements of Regulation 1699.6, Use Tax Direct Payment Permits.

(e) TAX AS DEBT. The tax required to be collected by the retailer and any amount unreturned to the customer which is not tax but was collected from the customer under the representation that it was tax constitute debts owed by the retailer to the state.

(f) REFUNDS OF EXCESS COLLECTIONS. Whenever the Board ascertains that a retailer has collected use tax from a customer in excess of the amount required to be collected or has collected from a customer an amount which was not tax but was represented by the retailer to the customer as being use tax, no refund of such amount shall be made to the retailer even though the retailer has paid the amounts so collected to the state. Section 6901 of the Revenue and Taxation Code requires that any overpayment of use tax be credited or refunded only to the purchaser who made the overpayment.

History: Adopted August 7, 1957, as restatement of previous ruling, effective September 11, 1957.

Amended August 2, 1965, applicable on and after August 1, 1965.

Amended October 8, 1968.

Amended and renumbered November 3, 1969, effective December 5, 1969.

Amended July 27, 1988, effective November 11, 1988. In subdivision (a), included reference to Section 6203 of the Revenue and Taxation Code which defines a "retailer engaged in business in this state."

Amended September 10, 1997, effective November 27, 1997. New third and fourth paragraphs added to subdivision (a).

Adopted September 1, 1999, effective October 5, 1999. Added new un-numbered fifth paragraph to subdivision (a) for provisions of section 6203(e) (Statutes of 1997, Chapter 621) concerning trade show and convention activities by out-of-state retailers. Also added new subdivision (c) for provisions of section 7051.3 (Statutes of 1997 Chapter 702 (SB-110)) concerning exemption certificates for use tax direct pay permits. Relettered subdivisions (c) to (d) and (d) to (e).

Amended May 31, 2001, effective August 1, 2001. New subdivision (b) added. Language "For . . . industry." added. Language of former fourth unnumbered paragraph of the regulation incorporated as new subdivision (b)(1) and phrase "For . . . 2000," added. New subdivision (b)(2) added. Ensuing subdivisions redesignated accordingly.


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Regulation 1685. Payment of Tax by Purchasers.

Reference: Sections 6202, 6203, 6367, 6401, and 7051.3, Revenue and Taxation Code.

(a) Purchasers and lessees of tangible personal property, the storage, use, or other consumption of which is subject to the use tax, must pay the tax:

(1) To the person from whom such property is purchased or leased, if such person holds a seller's permit or a Certificate of Registration—Use Tax.

(2) Directly to the board if the person from whom the tangible personal property is purchased or leased does not hold such a permit or certificate.

Purchasers and lessees should not pay the tax to a person who does not hold either a seller's permit or a Certificate of Registration—Use Tax. Purchasers and lessees will be liable for payment of tax to the board unless receipts are obtained from sellers holding a seller's permit or a Certificate of Registration—Use Tax.

(b) PAYMENT BY PERSONS HOLDING USE TAX DIRECT PAYMENT PERMITS. Notwithstanding the provisions of subdivision (a), persons who obtain use tax direct payment permits and issue use tax direct payment exemption certificates in good faith to the persons from whom tangible personal property, the storage, use, or other consumption of which is subject to the use tax is purchased, shall not pay the use tax to such persons but shall self-assess and pay state and local use tax under Part 1 (commencing with Section 6001), Part 1.5 (commencing with Section 7200), and, if applicable, Part 1.6 (commencing with Section 7251) directly to the Board. Use tax direct payment permits and exemption certificates must comply with the requirements of Regulation 1699.

History: Amended June 23, 1966.

Applicable as amended on and after July 1, 1966.

Amended and renumbered August 5, 1969, effective September 6, 1969.

Amended September 1, 1999, effective October 21, 1999. New subdivision (b) added to include the provisions of section 7051.3 (Statutes of 1997, Chapter 702 (SB 110)) concerning use tax direct payment permits.


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Regulation 1685.5 Calculation of Estimated Use Tax–Use Tax Table.

Reference: Section 6452.1, Revenue and Taxation Code.

(a) IN GENERAL. The Board of Equalization (BOE) is required to annually calculate the estimated amount of use tax due according to a persons adjusted gross income (AGI) and make such amounts available to the Franchise Tax Board (FTB), by July 30 of each year, in the form of a use tax table for inclusion in the instructions to the FTB's returns.

(b) DEFINITIONS AND DATA SOURCES.

(1) AGI RANGES. The use tax table shall be separated into eight (8) AGI ranges as follows:

(A) AGI less than $20,000;

(B) AGI of $20,000 to $39,999;

(C) AGI of $40,000 to $59,999;

(D) AGI of $60,000 to $79,999;

(E) AGI of $80,000 to $99,999;

(F) AGI of $100,000 to $149,999;

(G) AGI of $150,000 to $199,999;

(H) AGI more than $199,999.

(2) USE TAX LIABILITY FACTOR OR USE TAX TABLE PERCENTAGE. For the 2011 calendar year the use tax liability factor or use tax table percentage shall be 0.070 percent (.0007). On May 1, 2012, and each May 1 thereafter, the BOE shall calculate the use tax liability factor or use tax table percentage for the current calendar year by multiplying the percentage of income spent on electronic and mail order purchases for the proceeding calendar year by 0.37, multiplying the product by the average state, local, and district sales and use tax rate, and then rounding the result to the nearest thousandth of a percent.

(3) TOTAL PERSONAL INCOME. Total personal income shall be determined by reference to the most current personal income data published by the United States Bureau of Economic Analysis.

(4) TOTAL SPENDING AT ELECTRONIC SHOPPING AND MAIL ORDER HOUSES. Total spending at electronic shopping and mail order houses shall be determined by reference to the most current electronic shopping and mail order house spending data published by the United States Census Bureau.

(5) PERCENTAGE OF INCOME SPENT ON ELECTRONIC AND MAIL ORDER PURCHASES. The percentage of income spent on electronic and mail order purchases during a calendar year shall be calculated by dividing the total spending at electronic shopping and mail order houses for that year by the total personal income for that year, multiplying the result by 100, and rounding the result to the nearest tenth of a percent.

(6) AVERAGE STATE, LOCAL, AND DISTRICT SALES AND USE TAX RATE. The average state, local, and district sales and use tax rate for a calendar year shall be the total of:

(A) The rates of the statewide sales and use taxes imposed under section 35 of article XIII of the California Constitution and the Sales and Use Tax Law (Rev. & Tax. Code, § 6001 et seq.) in effect on January 1 of that year;

(B) The statewide rate of local tax imposed under the Bradley-Burns Uniform Local Sales and Use Tax Law (Rev. & Tax. Code, § 7200 et seq.) in effect on January 1 of that year; and

(C) The weighted average rate of the district taxes imposed under the Transactions and Use Tax Law (Rev. & Tax Code, § 7251 et seq.) in effect in the various jurisdictions throughout the state on January 1 of that year after taking into account the proportion of the total statewide taxable transactions (by dollar) reported for each jurisdiction during the fourth quarter of the calendar year that is two years prior to the calendar year for which the calculation is made. For example, the total reported taxable transactions (by dollar) for the fourth quarter of 2010 shall be used to determine the weighted average rate of the district tax rates in effect on January 1, 2012, to calculate the weighted average rate of district taxes for calendar year 2012.

(c) CALCULATION OF THE ESTIMATED USE TAX LIABILITY.

(1) The estimated use tax liability for the AGI range described in subdivision (b)(1)(A) shall be determined by multiplying $10,000 by the use tax liability factor or use tax table percentage and then rounding the result to the nearest whole dollar.

(2) The estimated use tax liability for the AGI ranges described in subdivision (b)(1)(B) through (G) shall be determined by multiplying the midpoint of each AGI range by the use tax liability factor or use tax table percentage and then rounding the result to the nearest whole dollar.

(3) The estimated use tax liability for the AGI range described in subdivision (b)(1)(H) shall be determined by multiplying each range members actual AGI by the use tax liability factor or use tax table percentage and then rounding the result to the nearest whole dollar.

(d) USE TAX TABLE FORMAT.

(1) The use tax table for calendar year 2011 shall provide as follows:


Adjusted Gross Income (AGI) Range: Use Tax Liability
Less Than $20,000 $7
$20,000 to $39,999 $21
$40,000 to $59,999 $35
$60,000 to $79,999 $49
$80,000 to $99,999 $63
$100,000 to $149,999 $88
$150,000 to $199,999 $123
More than $199,999 -Multiply AGI by 0.070% (.0007)


(2) The use tax tables for calendar year 2012 and subsequent years shall utilize the same format as the use tax table for calendar year 2011.

History: Adopted July 26, 2011, effective September 15, 2011.


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Regulation 1686. Receipts for Tax Paid to Retailers.

Reference: Section 6202, Revenue and Taxation Code.

(a) IN GENERAL. Each retailer required to collect use tax from purchasers (including lessees) must give a receipt to each purchaser (or lessee) for the amount of the tax collected. The receipt need not be in any particular form but must show the following:

(1) The name and place of business of the retailer.

(2) The serial number of the retailer's permit to engage in business as a seller or the retailer's Certificate of Registration—Use Tax.

(3) The name and address of the purchaser or lessee.

(4) A description identifying the property sold to the purchaser or leased to the lessee.

(5) The date on which the property was sold or leased.

(6) The sale price of the property, or, in the case of rentals, the amount of the rental for the period covered by the invoice.

(7) The amount of tax collected from the purchaser or lessee.

For sales transactions, and rental transactions with respect to which use tax applies, an invoice showing the data required above, together with evidence of payment of such invoice, will constitute a receipt.

(b) NOTICE TO LESSEE. For lease or rental transactions with respect to which use tax does not apply, the inapplicability of the tax must be indicated by a statement on the invoice that the tax does not apply for one of the following reasons:

(1) The property leased is of a kind (specify) the lease of which is excluded from the definition of "sale" and "purchase" by Sections 6006(g) and 6010(e), respectively, of the Sales and Use Tax Law.

(2) The property is being leased in substantially the same form as acquired by the lessor (or transferor) and the lessor (or transferor) acquired the property in a transaction that was a retail sale with respect to which the retailer reported and paid sales tax or as to which the lessor (or transferor) has paid use tax measured by the purchase price of the property.

(3) The property was acquired by the lessor in an exempt "occasional sale" and the lessor has paid, or elects to pay and will pay with his return for the period in which the property is first leased, use tax measured by the purchase price of the property in lieu of his rental charges.

(4) The amount of the rental payments is fixed by lease (or renewal thereof) prior to August 1, 1965, and the lessee does not have the unconditional right to terminate the lease upon notice.

History: Adopted August 7, 1957, as a restatement of previous ruling, effective September 11, 1957.

Amended and renumbered November 3, 1969, effective December 5, 1969.

Amended December 7, 1978, effective February 18, 1979. Amends subsection
(b)(2) which pertains to sales tax reimbursement and notice to lessees.


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Regulation 1687. Information Returns.

Reference: Section 7055, Revenue and Taxation Code.

Information returns must be filed by all persons who solicit orders for the sale of tangible personal property the storage, use, or other consumption of which is subject to the tax if the seller does not hold a Certificate of Registration—Use Tax, unless the seller is engaged in business in this State and holds a seller's permit under the Sales and Use Tax Law. Such returns shall be for quarters of the calendar year and must be filed not later than the last day of the month following each three-month period ending in March, June, September and December. Such returns must show:

1. The name and address of each purchaser from whom an order was taken.

2. The description and sales price of the tangible personal property sold or to be sold pursuant to such order.

3. The date upon which the order is taken.

4. The date as nearly as can be determined at which the tangible personal property is to be delivered to the purchaser.

As used in this Regulation, the term "Certificate of Registration—Use Tax" shall include Certificates of Authority to Collect Use Tax issued prior to September 11, 1957.

History: Adopted August 7, 1957, as restatement of previous rulings, effective September 11, 1957.

Amended and renumbered August 5, 1969, effective September 6, 1969.

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