Tax Guide for Veteran's Tax Topic

We recognize that understanding tax issues related to veterans can be time-consuming and complicated. We want to help provide the information you need and have created this page to help you better understand the sales and use tax topics important to veterans and veterans' organizations.

Overview

If you own a business in California and will be making taxable sales, you must register with the California Department of Tax and Fee Administration (CDTFA) for a seller's permit and you must file sales and use tax returns. Generally, sales tax applies to a veteran's sales as it would to anyone else. Laws that allowed qualified veterans and veterans' organizations to make certain sales not subject to tax ended on December 31, 2021.

Starting January 1, 2022, itinerant veteran vendors that qualified for an exemption are required to obtain a seller's permit, file sales and use tax returns, and pay tax on their sales to consumers in California.

Itinerant Veteran Vendor Program (This law ended December 31, 2021)

The itinerant veteran vendor program operated from April 1, 2010, through December 31, 2021. A qualified itinerant veteran vendor during this period was considered the consumer of items owned and sold (except alcoholic beverages or items over $100) and they were not required to hold a seller's permit. Instead, they paid sales or use tax on all taxable items they purchased and intended to sell.

A person was a “qualified itinerant vendor” when all the following applied:

• The person was a member of the United States Armed Forces, who received an honorable discharge or a release from active duty under honorable conditions,
• For the purpose of selling merchandise (tangible personal property), the person was a sole proprietor with no employees,
• The person had no permanent place of business in California, and
• The person was unable to earn a living by manual labor due to a service-related disability.

People generally considered to not have a permanent place of business may include:

• Vendors who only sell from mobile food carts, beverage stands, or lunch wagons, and
• Vendors who only sell at swap meets or other special events.

Examples of goods and services commonly sold by qualified itinerant veteran vendors include:

For more information, please see Revenue and Taxation Code section 6018.3 and publication 18, Nonprofit Organizations.

Nonprofit Veterans' Organizations

Nonprofit veterans' organizations that sell merchandise or goods must register for a seller's permit. Generally, items you sell are taxable whether you buy the items, make them, or receive them as a donation. As a representative of a nonprofit organization, you may purchase items using a resale certificate if you intend to resell them. You should not use a resale certificate to purchase items that will be used by your group, such as office supplies or tableware, and you should pay tax to your supplier on these items.

Sales of American Flags are not taxable, if the profits are used exclusively for the benefit of the organization. However, you should pay tax to your supplier when you purchase flags, or the materials used to make them.

When you sell “Buddy Poppies” or similar symbolic, temporary lapel pins, the purchase and sale of these items are not taxable when both the following conditions are met:

• The pins are sold or purchased by the Veterans of Foreign Wars or similar organizations, and
• The pins memorialize U.S. military veterans killed in foreign wars.

Tax does not apply to your sales of meals and food products when all of the following conditions are met:

• You sell the meals or food products at a social or other gathering you hold, and
• The meals or food products are provided or served to raise funds for your organization, and
• You use the proceeds to carry out the organization's functions and activities.

If you sell carbonated or alcoholic beverages included in the single price of a meal, those items are not taxable. If you sell carbonated or alcoholic beverages for a separate price, those items are taxable.

You should report all your sales on your sales and use tax return. You may claim a deduction for nontaxable sales under Other deductions with a clear explanation (for example, “flag sales by a nonprofit veterans' organization”).

For more information, please see publication 18, Nonprofit Organizations.

Sales Made on State-Designated Fairgrounds

Effective July 1, 2018, if you are a retailer who sells merchandise at a California state-designated fair property (“state-designated fairground”), you must separately state the amount of those sales on your sales and use tax return. Sales that take place on state-designated fairgrounds include over-the-counter sales at the fairgrounds and sales in which the merchandise is shipped from or delivered to a fairground or within California.

These reported amounts are used for funding allocation purposes only. There is no additional tax or fee due on these sales. For more information on the new reporting requirement, please see Tax Guide for Reporting Requirement for Sales on State-Designated Fairgrounds.

Vehicle Allowance from the U.S. Department of Veterans Affairs Not Subject to Sales or Use Tax

Veterans with a service-connected disability may be eligible to receive financial assistance from the U.S. Department of Veterans Affairs (VA) towards a vehicle purchase. Eligible veterans must have VA approval prior to purchase. The VA will pay the approved amount directly to the seller. The approved veteran is responsible for paying any remaining cost to the seller. The veteran's portion of the vehicle's purchase price is subject to sales or use tax. The portion of the vehicle's purchase price paid by the VA is considered a sale to the U.S. Government and is not subject to sales or use tax.

Example:
You are an eligible service member and were approved by the VA for a $5,000 allowance towards the purchase of a vehicle. The total cost of the vehicle is $10,000; you and the VA each pay $5,000 directly to the seller. Sales or use tax applies to the $5,000 portion you paid to the seller, but sales or use tax does not apply to the $5,000 portion the U.S. Government paid to the seller on your behalf.

For more information on how to apply for the allowance and eligibility requirements, please review the Automobile allowance and adaptive equipment webpage on the VA's website.

If You Need Help

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