California Use Tax

Many individuals and businesses in California buy items from out-of-state businesses that do not collect California tax on their sales. If you make such a purchase and then use, give away, store, or otherwise consume the item in this state, you may owe California use tax. This is true whether you order over the Internet, by telephone, or by mail. The use tax rate for a given California location is the same as the sales tax rate in your city.

How can I tell if I owe use tax?

Generally, if sales tax would apply when you buy a particular item in California, use tax applies when you make a similar purchase from a business outside the state.

For example, if you buy a dining table at a California retail store, sales tax applies to the transaction. If you choose instead to buy the table over the Internet from a company in North Carolina, and the table is shipped from outside California, use tax applies.

How do I pay the tax due?

While some out-of-state businesses collect California use tax, many do not, If the seller doesn’t’ collect California tax on your purchase, you must pay use tax to California. You may ask the California Board of Equalization for their Brochure # BOE 401-DS which includes a form with which to file. Or you may make an election to file by reporting your “use tax” liability on your California Income tax return. The Form 540 for 2003 has a line for that information.

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