New California Use Tax Collection Strategy

In a September 8, 2009 press release, the California State Board of Equalization announced its new use tax registration requirements in an effort to identify taxpayers that have been failing to pay use tax to the State. This effort is anticipated to bring in $183 million of previously uncollected use tax.

This use tax, required by law since 1935, is the same rate for any California location as the sales tax rate. California use tax is generally owed when individuals or businesses use, consume, give away, or store tangible personal property (i.e., products you can see, weigh, feel or touch, such as clothing, books, computers, DVDs, etc) in California that you purchased from an out of state vendor, where said vendor did not collect the California tax.

Businesses with gross receipts of $100,000 or more per year are now required to register and report and pay use tax. Use tax returns are required to be filed by April 15 of each year, reporting all purchases subject to use tax from the previous calendar year. The BOE has identified nearly 200,000 businesses that are required to register.

Our office expects that the State will also use the registration requirements as part of an effort to collect use tax from prior years. We are already seeing the state audit the past three to eight years or more to extract this tax from prior purchases. If you believe you may be subject to the reporting requirements and/or have not paid use tax according to the law, please contact our office immediately.

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