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Any tangible product (something that can be touched) is subject to either sales tax or use tax.
California is now enforcing the use tax for items purchased from the internet if no sales tax is charged. The purchaser
is responsible for paying the use tax. |
| How much is the use tax? |
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The use tax is the same as your local sales tax. See Collecting Sales Tax for the
current sales tax rates.
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| How is the use tax paid? |
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The California Franchise Tax Board and the Board of Equalization jointly collect the use tax. If you are already
selling tangible items to customers and have a sellers permit, there is a line on your quarterly
BT-401 sales tax return where you
declare any purchases that you made without sales tax, and pay your local sales tax on that amount.
Businesses without a seller's permit must report the use tax
on their annual income tax returns.
(form 100 or 100S).
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| What's the bottom line? |
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If you are audited, you will be liable for use tax on any internet purchases of tangible property that you make personally or for your business.
It is not due on services. So, if you download software that cannot be touched, there is no use tax. However, if the company provides you a physical CD with the software,
there is a use tax.
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| Questions? |
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For further information about the use tax,
visit http://www.boe.ca.gov/sutax/usetaxreturn.htm
or contact the Board of Equalization at (800) 400-7115.
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