Publication 125, Dry Cleaners
Purchases
Cleaners are consumers of the supplies and other materials they use in their cleaning services, and tax applies to their purchases of these items. If you purchase supplies from a vendor located outside of California and you are not charged California tax on your purchase, you must pay California use tax on your purchase. Use tax is intended to protect California merchants who otherwise would be at a competitive disadvantage when out-of-state sellers make sales to California customers without charging tax. The use tax rate in a California location is the same as the sales tax rate.
If you are required to hold a seller’s permit (visit Sales), you must pay use tax with 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. If you are not required to hold a seller’s permit, you may be required to hold a permit for reporting use tax.
Do you need a use tax permit?
A “qualified purchaser” must register with us and annually report and pay use tax directly to us, as required by Revenue and Taxation Code section 6225. If you are not required to hold a seller’s permit and are not currently registered with us for use tax purposes, you may be required to register as a “qualified purchaser.”
Prior to January 1, 2024, a “qualified purchaser” was defined as a person who received at least $100,000 in gross receipts from their business operations per calendar year and was not otherwise required to be registered with us. Gross receipts are the total of all receipts from both in-state and out-of-state business operations.
Beginning January 1, 2024, the definition of a “qualified purchaser” was revised to eliminate the requirement that the person receives at least $100,000 in gross receipts per calendar year from business operations. It instead requires that the person makes more than $10,000 in purchases subject to use tax (excluding vehicles, vessels, or aircraft) per calendar year if the use tax imposed on those purchases has not otherwise been paid to a retailer engaged in business in this state or authorized to collect the tax. This change is effective from January 1, 2024, through December 31, 2028.
Notes
On January 1, 2029, that definition of a “qualified purchaser” will revert to the person receiving at least $100,000 in gross receipts per calendar year from business operations.
You can register online by selecting Register Online under Register for a Permit and then selecting Register a New Business Activity. After you register, you may pay any use tax due when you file your return. You can also register in person at any of our offices to report use tax.
For additional information, visit publication 126, Mandatory Use Tax Registration for Service Enterprises.
Purchasing merchandise for resale
If you purchase tangible personal property for resale, your purchase from your vendor is not subject to sales or use tax provided the sale is properly documented. Your supplier will ask you to provide a resale certificate as proof that the property was purchased for resale. For more information, visit Using a Resale Certificate, in publication 73, Your California Seller’s Permit.
There may be times when you are not sure whether you will resell or use the item you are purchasing. In such cases, we recommend that you pay tax when you purchase the item from your supplier. If later, you resell the item before using it, you can take a tax-paid purchases resold deduction explained below.
Tax-paid purchases resold deduction
If you pay California tax on an item when you purchase it and then resell the item before using it, you can claim a deduction on the tax-paid purchases resold line on the sales and use tax return on which you reported the sale. For example, you pay tax on sweater combs you purchased for use in your cleaning business (your cost $1 each). Unable to find similar combs at retail stores, customers ask you to sell them combs for their use at home. You sell new combs for $2. You must report the $2 comb sale but can claim a $1 tax-paid purchases resold deduction on your return.
Revision September 2026