California Use Tax For Business Use

In general, a business must pay California use tax on purchases from a retailer outside California (for example, by telephone, over the Internet, by mail, or in person) if both of the following apply:

• The seller does not collect California sales or use tax. Check the purchase invoice or receipt to verify if the tax was added by the seller.
• You use, give away, store, or consume the item in California. Report purchases of items that would have been taxable if purchased from a California retailer.

For example, you would include purchases of equipment, supplies, and books. Examples of purchases not subject to tax include food for human consumption such as peanut butter and chocolate. Also, electronically downloaded software, music, and games are not subject to tax if no tangible storage media is obtained.

How do I calculate what I owe?

Use the sales and use tax rate applicable to the place in California where the item is used, stored, or otherwise consumed and apply it to the total purchase price. Include handling charges.

1. Example
2. Question: I bought a case of printer paper online for $75, including shipping, for use in my business. I had it sent to my business, and was not charged tax during the purchase. How much use tax does the business owe?
3. Answer: Find your business' local tax rate at the time of the purchase on this webpage. If your local rate is 8.0%, then you would owe $6 in use tax ($75 x .08 = $6).

Shipping charges are generally not taxable when items are shipped by common carrier or US Mail, the invoice separately states charges for shipping, and the charge is not higher than the actual cost for shipping.

How does my trade or business pay the tax due?¹

Your payment method may vary depending on the type of business.
The following businesses are required to report purchases subject to use tax directly to us:

• Businesses that have a California seller’s permit.
• Businesses, known as “qualified purchasers,” not required to hold a California seller's permit, but:
  • Prior to January 1, 2024, receive at least $100,000 in gross receipts from business operations per calendar year.
  • From January 1, 2024, through December 31, 2028, make 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 authorized to collect the tax.
  • Beginning January 1, 2029, receive at least $100,000 in gross receipts from business operations per calendar year.
  Please see our guide on Qualified Purchasers for more information.
• Businesses that have a California consumer use tax account.

Businesses that don't fall into one of the above categories have two options:

1. Pay use tax on state income tax forms - The business can complete the worksheet included in the instructions to the income tax return form applicable to its entity to determine the amount owed
2. You may pay use tax on one-time purchase. Follow the log-in and step-by-step reporting and payment instructions.

¹ Purchases of vehicles, vessels, aircraft, and mobile homes, as well as purchases of cigarettes and tobacco products cannot be reported on your California state income tax return. Please call our taxpayer information section at 1-800-400-7115 for more information.

When is the tax due?

April 15th following the calendar year in which you made your purchase, if you are eligible to pay use tax on your California income tax return.

Otherwise, report and pay use tax directly to the California Department of Tax and Fee Administration at the time you are instructed to file your returns.

If you are late in paying your use tax, you may be eligible to pay a liability from a previous year and avoid late payment penalties under our In-State Voluntary Disclosure Program.

For More Information

If you have questions or would like additional information, you may call our Customer Service Center at 1-800-400-7115, or your local CDTFA office.