Qualified Purchaser Program
Qualifications

A “qualified purchaser,” as defined in R&TC section 6225, is a person that meets all of the following conditions:

  • The person:
    • Prior to January 1, 2024, received at least $100,000 in gross receipts from business operations per calendar year;
    • Beginning January 1, 2024, through December 31, 2028, makes more than $10,000 in purchases subject to use tax 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; or
    • Beginning January 1, 2029, receives at least $100,000 in gross receipts from business operations per calendar year.
  • The person is not a retailer selling tangible personal property for storage, use, or other consumption in this State who is required to hold a seller's permit or certificate of registration for use tax as described in R&TC section 6226.
  • The person does not hold a use tax payment permit as described in R&TC section 7051.3.
  • The person is not otherwise registered with us to report use tax.

A “person” is defined in R&TC section 6005 as any individual, firm, partnership, joint venture, limited liability company, association, social club, fraternal organization, corporation, estate, trust, business trust, receiver, assignee for the benefit of creditors, trustee, trustee in bankruptcy, syndicate, the United States, this state, any county, city and county, municipality, district, or other political subdivision of the state, or any other group or combination acting as a unit.

Not Engaged in Business in California. If you are not engaged in business in California and have no business location or business presence in California, but you use a California address for your income tax return (such as a CPA or tax preparer), you are not required to register.

Gross Receipts from Business Operations (for periods prior to January 1, 2024, and beginning January 1, 2029)

Gross receipts from business operations include the total of all amounts received from goods and services from both in-state and out-of-state business operations before subtracting any costs or expenses. The following are common federal income tax forms that are used to determine gross receipts:

  • Form 1040, U.S. Individual Income Tax Return
  • Form 1065, U.S. Return of Partnership Income Return
  • Form 1120, U.S. Corporate Income Tax Return
  • Form 1120-S, U.S. Income Tax Return for S Corp
  • Schedule C, Profit or Loss From Business
  • Schedule E, Supplemental Income and Loss
  • Schedule F, Profit or Loss From Farming
  • Form 4835, Farm Rental Income and Expenses
  • Form 1099-DIV, Dividends and Distributions
  • Form 1099-MISC, Miscellaneous Information

Multiple Businesses. We use gross receipts from all business operations, both in-state and out-of-state, with the same ownership in a calendar year to calculate the $100,000 minimum requirement as defined in R&TC section 6225. For example:

  • For federal income tax purposes, you report $75,000 in gross receipts from your legal services business, and you report $60,000 in gross receipts from your marketing business. For purposes of R&TC section 6225, you are considered to receive at least $100,000 in gross receipts.
  • For federal income tax purposes, you report $50,000 in gross receipts on Schedule C, Profit or Loss From Business, $40,000 in gross receipts on Schedule E, Supplemental Income and Loss, (which is used to report rental income, royalties, and other types of income), and $40,000 in gross receipts on Schedule F, Profit or Loss From Farming. For purposes of R&TC section 6225, you are considered to receive at least $100,000 in gross receipts.
  • For federal income tax purposes, you report $80,000 in gross receipts from real estate rentals in Nevada, and $80,000 in gross receipts from real estate rentals in California. For purposes of R&TC section 6225, you are considered to receive at least $100,000 in gross receipts.

Exempt for Income Tax Purposes. If your business is considered exempt for income tax purposes, you will be considered a Qualified Purchaser if your gross receipts are at least $100,000. While your status is exempt for income tax purposes, you are not exempt for sales and use tax purposes.

1099 Income. If you report 1099 income as business income on Schedule C, it will be used to determine gross receipts from business operations. If you are a statutory employee, your 1099 income generally qualifies as gross receipts for business operations. A statutory employee is a worker who is an independent contractor under the common law rules, that are treated as employees by statute for certain employment tax purposes if they meet certain criteria. For details of the criteria, please see Internal Revenue Service's guide on statutory employees.

Gross Receipts Yearly Threshold

Prior to January 1, 2024, and beginning January 1, 2029, if your yearly gross receipts are at least $100,000, you are considered a Qualified Purchaser. However, if your gross receipts drop below the $100,000 threshold for two consecutive years, you are allowed to close your qualified purchaser use tax account. However, you are still required to report and pay the use tax on any purchases you will make from out-of-state retailers or other sellers not required or authorized to collect the tax where you've not already paid the tax. Please note that 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 fell below $100,000 for the last two consecutive years. If your gross receipts from business operations are below $100,000, but you have use tax to report, please report and pay the use tax due on your final return or on your Franchise Tax Board income tax return.

Automatic Close-out

We will automatically close your qualified purchaser use tax account after you have filed returns for three consecutive years without reporting any purchases subject to use tax. If your account has been closed, you will receive a notice of closeout. However, if you meet threshold requirements of R&TC section 6225 in the future and make purchases subject to use tax, you must re-register with us.

Insurance Company. Insurance companies that pay the gross premium tax with returns filed with the Department of Insurance do not have to register as a qualified purchaser.