published November, 2009
The California Board of Equalization has announced that it would like to give you the “opportunity” to register and pay Use Tax. It will be mailing out registration forms between September and December this year.
They’re starting with companies that GROSS $100,000 or more. If you’re in this category, or if you ever were in this category, expect to be hearing from the state Board of Equalization soon, inviting you to register your company. Registering is basically a “postcard” of information. It doesn’t mean you’re getting a resale number. You can proactively register by going to http://www.boe.ca.gov/pdf/boe404a.pdf and filling out the form, but registering is not optional.
Once you’re registered, they’ll want you to file Use Tax returns. They’re going to want you to file for 2007, 2008 and 2009. You get credit for having already paid the Use Tax if you “volunteered” and paid on your California return already. If you owe for unpaid Use Tax for prior years, there will be penalties and interest. You might be able to avoid penalties if you have a really really good excuse, but you probably don’t.
What the heck is “Use Tax?”
Remember years ago when you bought those books from Amazon.com and they didn’t charge you sales tax because you were buying from out of state? Well, you were supposed to pay the sales tax on those goods to California; instead of sales tax, they call it Use Tax when you’re paying California for purchases that originate out of state. Really. No really, you were supposed to pay the use tax. Yes. Since 1935. Yep.
California “helped” taxpayers by adding a line on the Form 540 where you could voluntarily pay the sales tax, but it looks like not enough people volunteered.
You only need to pay Use Tax on the purchases from out of state that you used (and did not resell) in California.
If you already have a sales tax license you don’t need to do this, because you’re already filing a combined sales and use tax return.
The CA BOE requires people to file electronically, and the rates for Use Tax are the same as Sales Tax rates.
You can find your rate at http://www.boe.ca.gov/pdf/pub71.pdf which lists cities and counties.
This is why tax preparers have been asking ‘did you purchase anything out of state for use in California that you didn’t pay sales tax on? The Use Tax applies to everyone, not just businesses with receipts over $100k, but they’re starting with businesses.