Frequently Asked Questions – New Use Tax Registration Requirements

Frequently Asked Questions (FAQ) For Qualified Purchasers Pursuant to Revenue & Taxation Code Section 6225 (Registration for Use Tax)

Registration

I just learned about new legislation that requires certain purchasers to register to report and pay use tax. What is this new legislation?
Assembly Bill x4-18 (Stats. 2009, Ch. 16) added section 6225 to the Revenue and Taxation Code, which requires a "qualified purchaser" to register with the Board of Equalization (BOE) and report and pay use tax directly to the BOE.
Who is a "qualified purchaser?"
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 is 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.
A "person" is defined in section 6005 of the Revenue and Taxation Code.

Back to Top
How does a "qualified purchaser" register?
A qualified purchaser may register for a use tax account by completing the BOE-404-A, Qualified Purchaser Use Tax Registration, and mailing it to the local BOE field office. Upon registration the person will be assigned an account number and express login code, which is used for eFiling returns.
I received a notice from the BOE notifying me that I am being registered as a qualified purchaser. Do I still need to mail in the Use Tax Registration form enclosed with the letter?
Yes. The BOE must ensure it obtains the most current and accurate information.

Back to Top
If I did not receive a notice from BOE, but I am a qualified purchaser, must I still register?
Yes. A qualified purchaser must register for a use tax account by completing the BOE-404-A, Use Tax Registration, and mailing it to the local BOE field office.
I am currently registered to report and pay my sales tax. Do I need to register for this new requirement?
No. If you are already registered with the BOE you are not considered a qualified purchaser. You must continue to report and pay your sales and use tax liability on your sales and use tax returns.

Back to Top
Must I register if I am considered a qualified purchaser under Revenue and Taxation Code section 6225?
Yes. The registration for qualified purchasers is not voluntary.
Is there a fee to register?
No.

Back to Top
What is my start date?
Generally, the date your business began operating is your start date.
I currently report all my use tax liability on my Franchise Tax Board (FTB) income tax return. Do I still need to register if I am a qualified purchaser under Revenue and Taxation Code section 6225?
Yes. Even though you have reported your use tax liability on your income tax return, as a qualified purchaser under section 6225 of the Revenue and Taxation Code you are required to register with the BOE.

Back to Top
My business is considered exempt for IRS purposes. Do I still need to register if my gross receipts exceed $100,000 per year?
Yes. While your status is exempt for IRS purposes you must still register with the BOE.
What information must I send to the BOE as proof that my business is exempt from use tax?
The BOE will examine any documentation you submit. You may mail your documentation to the local BOE field office where your account is located.

Back to Top
I have multiple locations for my business. Do I need a separate account for each location?
No. You may report all of your purchases using one account for all of your locations.
If I'm a qualified purchaser under Revenue and Taxation Code section 6225, but I owe no use tax because I have paid tax on all of my purchases must I still register and file use tax returns?
Yes. Revenue and Taxation Code section 6225 is a registration requirement, and although you may not owe any use tax, you must be registered and file returns.

Back to Top
I have multiple businesses with the same ownership, none of which have gross receipts of $100,000 or more in a calendar year. However, the combined gross receipts of all the businesses exceed $100,000. Must I register?
Yes, since the combined gross receipts of your business operations exceed $100,000 in a calendar year and the businesses are owned by the same entity, you must register.
I have no physical presence in California (i.e. store, office, warehouse, or other place of business). Must I register?
No. If you have no physical presence in California, you are not required to register under ABx4-18.

Back to Top
I file a consolidated return for income tax purposes. May I file a consolidated return for use tax?
No. The law requires every legal entity meeting the requirements of a qualified purchaser to register and file returns. Although you may file a consolidated return for income tax purposes, you may not do so for use tax.
I file a Schedule C (Profit or Loss From Business), Schedule E (Supplemental Income or Loss) which is used to report rental income, and/or Schedule F (Profit or Loss From Farming) with my Federal Income Tax Return. Must I register?
If the gross receipt on any one of those schedules or if the combined gross receipts of two or more of those schedules exceeds $100,000, you are required to register.

Back to Top
My business is an insurance company. Must I register?
Insurance companies that pay the gross premium tax with returns filed with the Department of Insurance do not have to register.

Use Tax

What is use tax?
Generally, use tax applies when a person or business in California purchases tangible merchandise to be used, consumed, given away, or stored in California from a retailer outside of this state who does not collect California tax on the sale. In other words, if sales tax would apply when a particular item is purchased in California, use tax applies when a similar purchase is made from a retailer outside the state and tax is not charged.
Is the use tax new to California?
No. Use tax has been a part of the California Revenue and Taxation Code since July 1, 1935.

Back to Top
What is the rate of the use tax?
The use tax rate is the same as the sales tax rate. You may find a listing of local tax rates here.
How do I determine the use tax rate or the sales tax rate in my area?
Publication 71, California City and County Sales and Use Tax Rates, provides individual rates for all cities and counties throughout California. You may download a copy of publication 71, or order a copy by calling our Taxpayer Information Section at 800-400-7115.

Back to Top
What are common types of purchases that are subject to use tax?
Supplies and equipment are items that are often purchased outside of California for consumption or use in California.
Where in my accounting records should I look to help me locate items subject to use tax?
Depreciation schedules, accounts payable, and expense records are usually the types of accounting records that will help identify possible use tax purchases. Reviewing the invoices for items identified in your records may be necessary to determine if California sales or use taxes have been paid.

Back to Top
May I report my purchases subject to use tax by utilizing a projection (sampling) method?
Yes. However, you are responsible for verifying the accuracy of the projection method used and ensuring that the correct amount of purchases is reported.

Filing Requirements

How will I file my returns?
Upon registration your account will be set up so that you will file your returns electronically (eFile).
Where can I learn how to eFile a use tax return?
You can view the eFile video tutorial.

Back to Top
What if I'm unable to eFile?
To be excused from eFiling you must submit an exemption form to our Taxpayer Information Section. To obtain a request form, please phone our Taxpayer Information Section at 800-400-7115.
How many prior year returns must I file as a qualified purchaser under Revenue and Taxation Code section 6225?
Although the Revenue and Taxation Code allows the BOE to go back as far as eight years (longer if fraud is involved), the BOE will only require returns to be filed for purchases made in the past three years

Back to Top
If I've already reported use tax on my FTB income tax returns, must I still file BOE returns for those same years?
Yes. When filing your returns, you may claim the amount of tax you reported on your FTB income tax returns on the same line that allows you to claim the amount of tax imposed by other states.
Why is relief of interest not permitted?
Interest may only be relieved if the delay in paying the tax was due an error or unreasonable delay on the part of BOE staff (Revenue and Taxation Code section 6593.5).

Back to Top
How can I stop interest from accruing for unpaid periods?
To stop interest from accruing, you can eFile your returns and pay the total tax due. Interest will stop accruing in the month in which the tax is paid.
If I overpaid, how may I file a claim for refund?
If you overpaid your use tax liability, you may file a claim for refund with the BOE. You may use form BOE-101, Claim for Refund, to file your claim and mail it to the address below:

Board of Equalization
Refund Section, MIC: 39
PO Box 942879
Sacramento, CA 942879-0039

Back to Top
After I am registered will I be required to file returns for subsequent years?
Yes, Revenue and Taxation Code section 6225 requires the person to be registered on an ongoing basis, and you are required to file returns for each calendar year your business is operating.
Will I owe penalty and interest for use tax due on my past due returns? If so, is there relief?
Yes. Interest is not generally subject to relief. You may submit form BOE-735, Request for Relief of Penalty, to request relief of the late filing penalties imposed. Instructions on where to submit your request are provided directly on the form.

Back to Top
As a qualified purchaser under section 6225 of the Revenue and Taxation Code must I still file returns even if I have no purchases to report?
Yes. To file your returns you simply will put zero as the amount of purchases for the calendar year in which you are reporting.
How do I eFile my use tax return?
The welcome letter or reminder letter you received has an express login code and account number. Using the express login code and account number, follow the prompts on the screen to create an eClient login.

If you are unable to register as an eClient, you can still eFile your return using your express login code.

Back to Top
What if I did not receive or cannot locate the welcome letter or reminder letter with my express login code and account number? How will I be able to eFile my return?
You may either call your local BOE field office for assistance, or you may contact our Taxpayer Information Section at 800-400-7115.
I’m having difficulty registering as an eClient. May I bypass registering as an eClient and simply eFile my use tax returns using just my Express Login Code and Account Number?
Yes, you may access the “or Use Express Login” link on the “eFile Sales & Use Tax” page to reach the “Electronic Services Menu” page. After you access the “Electronic Services Menu” page, simply fill in your Express Login Code and Account Number. You will then be able to eFile your returns.

Back to Top
I obtained an exemption from eFiling my returns. How do I file my paper returns?
Contact your local BOE field office to request paper returns. Once you receive your paper returns, you may mail them to the address printed on the return.

Due Dates

What is the due date of my returns as a qualified purchaser under Revenue and Taxation Code section 6225?
April 15th for purchases made in the previous calendar year.
Is the April 15th due date established for the previous 2007 and 2008 years?
No. Since Revenue and Taxation Code section 6225 was not established until 2009, the due dates for the 2007 and 2008 returns is January 31, 2008 and January 31, 2009 respectively.

Back to Top

Other Information

Does the BOE have any additional publications about use tax?
Yes. publication 110, California Use Tax Basics, publication 112, Purchases from Out-of-State Vendors and publication 123, California Businesses: How to Identify California Use Tax Due are available to download.
How may I obtain more information about this new requirement?
Besides these FAQ's, the BOE has published a special notice, a news release, and publication 126, Mandatory Use Tax Registration for Service Enterprises, on its website.

Back to Top