Tax: Personal Use Tax on California Tax Return

Individuals are responsible for paying Sales or Use Tax on all of their purchases.  If sellers charge tax at the point of purchase, it is called Sales Tax and is calculated at the rate based on the location of the store where purchased.  If, however, a seller does not charge California Sales Tax on purchases delivered to California residents, the purchaser is responsible for paying Use Tax based on the address where the goods are delivered.

The following reminder was issued by the State Board of Equalization on March 13, 2013:

Use Tax Basics (from the State Board of Equalization website):

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 example, you would owe use tax when:

  • You purchase something from a mail order catalog, the Internet, an online auction, television shopping network, etc. located outside California and you don’t pay tax to that retailer.
  • You withdraw taxable merchandise from your business’s resale inventory and use it for your personal or business use.
  • You purchase vehicles, vessels, mobile homes, and aircraft from sellers who do not hold seller’s permits.

To report use tax on your income tax return, you may use either the Use Tax Worksheet or the Use Tax Table. Both are included in the tax booklet instructions.  Instructions for completing line 95 on California for 540A can be found at: https://www.ftb.ca.gov/forms/2012/12_540a_540ins.pdf

Link to California Form 540: https://www.ftb.ca.gov/forms/2012/12_540a.pdf

In an effort to assist you with your use tax reporting requirements, the Franchise Tax Board (FTB) included a use tax line on FTB Forms 540A, 540 2EZ, and 540, California Resident Income Tax Returns. This gives you the option to report your use tax liability on your individual income tax return for out-of-state purchases. In addition, the form instructions include a Use Tax Worksheet and use tax rates to help you compute the proper use tax liability. New for 2011, you may use the Estimated Use Tax Table to estimate and report the use tax due on individual, nonbusiness items you purchased for less than $1,000 each.

If you have questions about your Use Tax liability for 2012 or prior years, please contact your personal tax professional for advice.

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