Qualified Purchaser Program
Frequently Asked Questions (FAQs)

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. The majority of use tax transactions involve tangible merchandise purchased from a retailer located outside of this state or when tangible merchandise is ordered from a California retailer, but shipped from outside California. Use tax is imposed on the purchaser, but retailers engaged in business in this state are required to collect use tax. Additionally, certain retailers may also voluntarily register to collect use tax on their California sales. If sales tax would apply when a particular item is purchased in California, then use tax applies when a similar purchase is made from a retailer outside the state.

What is the difference between sales and use tax?

Sales tax is imposed on retailers and is generally imposed on sales made in this state. Retailers may collect reimbursement from their customers on transactions subject to sales tax. The retailer is responsible for reporting and paying the tax to the state. As discussed above, use tax applies to tangible merchandise purchased for use in California. However, use tax does not apply to a transaction that is subject to sales tax. When use tax applies to a transaction, and it is not collected by a retailer engaged in business in this state or authorized to collect the tax, the purchaser may be required to report and pay the use tax to the state. The use tax rate is the same as the sales tax rate for the location where storage, use, or other consumption of the items occurs.

Who is considered a qualified purchaser?

Prior to January 1, 2024, a “qualified purchaser” is a person that receives at least $100,000 in gross receipts from their business operations per year.

From January 1, 2024, through December 31, 2028, a “qualified purchaser” is the person that makes more than $10,000 in purchases subject to use tax (excluding vehicles, vessels, or aircraft) per calendar year where 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.

On January 1, 2029, the definition of a “qualified purchaser” will be the person receiving at least $100,000 in gross receipts per calendar year from business operations. Qualified purchasers are required to register with us and report and pay use tax due on purchases made from out-of-state retailers without paying tax.

I think I meet the requirement of a qualified purchaser. What do I do now?

Beginning January 1, 2024, if you made more than $10,000 in purchases subject to use tax (excluding vehicles, vessels, or aircraft) in the preceding calendar year and 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, you must register with us as a qualified purchaser. Beginning January 1, 2029, if your gross receipts from business operations are greater than $100,000 per year, you must register with us. You can register online using our Online Services.

Do I have to register if I don't make any purchases subject to use tax?

Beginning January 1, 2024, until December 31, 2028, no. Beginning January 1, 2029, if your gross receipts from business operations in the preceding calendar year are greater than $100,000 per year, you are considered a qualified purchaser and should be registered with a qualified purchaser use tax account. You must file a return even if you did not make any purchases subject to use tax during the reporting period. In such cases, you will simply enter zero as the amount of purchases for the calendar year in which you are reporting.

What if my yearly gross receipts fall below $100,000?

Beginning January 1, 2029, if your gross receipts from business operations fall below $100,000 for the last two consecutive years, you are allowed to close your qualified purchaser use tax account. This closeout process is not automatic; therefore, you may close your account by contacting your local CDTFA office and providing sufficient documentation indicating your gross receipts from business operations have fallen below $100,000 for the last two consecutive years.

How do I report use tax if I am not required to register as a qualified purchaser or I have never met the qualifications of a qualified purchaser?

If you are not required to hold a seller's permit or use tax account, the easiest way to pay use tax is to report it on your California Income Tax Return found at the Franchise Tax Board website. Follow the instructions included with your income tax return. Complete the worksheet included in those instructions to determine the amount of your use tax liability.

My qualified purchaser use tax account was closed, but I have use tax to report. Do I need to re-register?

After your account is closed, if you make more than $10,000 in purchases subject to use tax of which use tax has not been paid to the retailer, you must re-register and file a qualified purchaser use tax return with us. Beginning January 1, 2029, if you meet the $100,000 gross receipts threshold requirement of R&TC section 6225, you must re-register and file a qualified purchaser use tax return.

I closed my business already. Why do I have to register?

If your business has closed, but you met the threshold, as stated in the Qualifications page, during any calendar year while your business was in operation, you still need to register and file a return for the period in which your business operated. Once you file your return, submit CDTFA-345-QP-Web, Qualified Purchaser Registration Update, to your local CDTFA office to notify us that your business has closed.