The concept of use tax is simple: think of it like sales tax on items bought from an out-of-state retailer but used in California. Paying use tax is also simple: just fill in the use tax box when preparing your 2015 state income-tax return. It just takes a moment to glance at the Use Tax Lookup Table online or at the instructions for your state income-tax return to determine your use-tax liability for nonbusiness purchases less than $1,000 each.
You may owe use tax on items purchased online, by telephone or by mail order from an out-of-state retailer without paying tax. Generally, when you buy merchandise in California, you’re charged sales tax. Use tax applies when you make a similar purchase without paying tax from a business located out of state. This includes items purchased abroad whether on business or vacation (when purchased abroad, the first $800 of hand-carried merchandise is exempt from use tax).
Californians have been required to pay use tax since 1935. Like sales tax, use tax helps fund essential community services like education, public safety, transportation and health care.
If you didn’t save receipts for nonbusiness purchases that are less than $1,000 each, don’t sweat it. Simply use the Lookup Table, find your adjusted gross income range and enter the appropriate use tax liability in the use tax box of your state income tax form 540 or 540 2EZ. Use tax on items that cost $1,000 or more, or that are used in your business, is calculated separately. If you’re a business owner or have purchased an item for more than $1,000, visit the Board of Equalization’s use tax page [boe.ca.gov/sutax/usetax.htm] for more information.
Use tax paid to California through income-tax returns has grown steadily every year since 2012, but the BOE estimates that about $1 billion in use tax still goes uncollected each year. That’s enough money to pay the full-time salaries of 9,789 police officers, 8,188 firefighters, or 13,288 teachers. Keep in mind you could owe interest and penalty fees if you don’t pay owed use tax on time.
The five-member California State Board of Equalization (BOE) is a publicly elected tax board. The BOE collects $60 billion annually in taxes and fees, supporting state and local government services. It hears business tax appeals, acts as the appellate body for franchise and personal income tax appeals, and serves a significant role in the assessment and administration of property taxes. For more information on other taxes and fees in California, visit taxes.ca.gov.
