California Use Tax, Good for You. Good for California

California's sales tax generally applies to the sale of merchandise, including vehicles, in the state. California's use tax applies to the use, storage, or other consumption of those same kinds of items in the state.

Generally, if sales tax would apply when you buy physical merchandise in California, use tax applies when you make a similar purchase without tax from a business located outside the state.

For these purchases, the buyer is required to pay use tax separately.

If you made purchases for a business use and may owe tax, click on the For Business Use tab for more information and payment options.

If you made purchases for your personal use and may owe tax, click on the For Personal Use tab for more information and payment options. Watch this video for more information about use tax:

Many smart shoppers can find bargains online, but don't realize they can incur a tax bill in the process. California law requires tax on in-state purchases, and also requires tax on items purchased out-of-state for use in California.

How to Pay Use Tax

If you have a California seller's permit, you must pay the use tax due on business related purchases with your sales and use tax return in the period when you first used, stored, or consumed the item in California. Report the amount of your purchase under “Purchases subject to use tax,” (line 2) on the return.

If you are a “qualified purchaser,” you must pay your use tax due by filing your return for the previous calendar year by April 15.

A “qualified purchaser” must register with us and annually report and pay use tax directly to us, as required by Revenue and Taxation Code (R&TC) 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.”

A "qualified purchaser" means a person that meets all of the following conditions:

• Prior to January 1, 2024, a “qualified purchaser” was defined as a person that 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.
• 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.
• On January 1, 2029, that definition of a “qualified purchaser” will revert to a person receiving at least $100,000 in gross receipts per calendar year from business operations. Gross receipts are the total of all receipts from both in-state and out-of-state business operations.
• The person is not required to hold a seller's permit or certificate of registration for use tax as described in R&TC section 6226.
• The person is not a holder of a use tax direct payment permit as described in R&TC section 7051.3.
• The person is not otherwise registered with the us to report use tax.

*See Assembly Bill 1097 (Stats. 2023, ch. 355)

You can register on our website at www.cdtfa.ca.gov by selecting Register Online under Register for a Permit and then selecting Register a New Business Activity. Once you have registered, you may pay any use tax due after filing your return. You can also register to report use tax in person at any of our offices.

For more information, see publication 126, Mandatory Use Tax Registration for Service Enterprises.

If you are not required to have a seller's permit or a use tax account you must pay use tax in one of the following ways.

•  The easiest way to report and pay the use tax is on your California state income tax return. 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. As part of reporting use tax on the state income tax return, you may also choose to use a Use Tax Lookup Table.
  
  OR
• Pay use tax directly to us by using our Online Services.

Sales Tax vs. Use Tax: What’s the Difference?

Tax collected by the retailer here in California is called sales tax, and the retailer is responsible for reporting and paying the tax to the state. When an out-of-state or online retailer doesn't collect the tax for an item delivered to California, the purchaser may owe "use tax," which is simply a tax on the use, storage, or consumption of personal property in California.

Exempt Items

Items that are exempt from sales tax are exempt from use tax as well. Use tax liabilities are often created by internet or mail order purchases with out-of-state retailers not required to collect the tax. Be sure to review your receipts from Internet and other out-of-state purchases to determine if tax was charged.

Why Is There a Use Tax?

The use tax, which was created in July 1935, is a companion to California's sales tax that is designed to level the playing field between in-state retailers who are required to collect tax, and some out-of-state retailers who are not. Use tax, just like sales tax, goes to fund state and local services throughout California.

What Kinds of Purchases Are Taxable?

For questions on whether a purchase is taxable read the California Use Tax Information, or call our Customer Service Center at 1-800-400-7115 (CRS 711).

How Do I Find My Local Tax Rate?

You can look up your local sales and use tax rate.

Vehicles, Vessels, and Aircraft

If you have questions on how to report and pay use tax on the purchase of vehicles, vessels, and aircraft, see our Tax Guide for Purchasers of Vehicles, Vessels, & Aircraft or refer to Publication 79, Documented Vessels and California Tax, or Publication 79-A, Aircraft and California Tax. The use tax due on these purchases cannot be reported on your California state income tax return.

Cigarette and Tobacco Products

If you are registered with the California Department of Tax and Fee Administration as a cigarette and/or tobacco products consumer, your purchases of cigarette and tobacco products may not be reported on your sales and use tax return. If you need additional information, contact our Customer Service Center at 1-800-400-7115 (CRS 711).

Foreign Purchases

Generally, use tax also applies to foreign purchases of tangible personal property brought into California for storage, use, or other consumption. More information about items brought into California through U. S. Customs is available online.