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California: Shopping Craigslist? Don’t Forget the Sales/Use Tax.


 California, Craigslist, and Sales and Use Tax. It May Be Easier to Go to the Store.

Looking for a new sofa? Collect vinyl records from the 60s? Need clothes for your daughter's American Girl Doll? Sounds like a job for Craigslist!

It seems safe to assume that a good number of Craigslist shoppers don't stop to think about sales or use tax. If they find an item they like, they make the purchase, plan the exchange, and go on happily with their lives. The same goes for many people who use Craiglist to help clean out their garages and basements. Yet the California State Board of Equalization reminds:

"There is no general tax exemption for sales made over the Internet." 

BOE Publication 177 states that "Sales and use tax applies to Internet sales in the same way as sales made at retail stores or other outlets… ."

It turns out that "[s]ales by retailers made through Internet auction houses, such as eBay and uBid, or sites that offer online classified advertisements (online advertisers) such as Craigslist and Amazon, are generally subject to California sales tax." The involved parties -- seller and purchaser -- are responsible for the taxes. The Craigslist terms of use reads:  "Any applicable sales or other taxes are additional to the stated fee."

So that sofa you purchased for the family room? You owe use tax on it. Ditto for the vinyl records and that box of American Girl Doll clothes. Right? Well, maybe not. There is an exception to rule stated above.

The California BOE allows an exemption from sales and use tax for private parties who make "fewer than three sales in a 12-month period… ." In such cases, "the purchase would not be subject to use tax since the sale is considered an occasional sale." The BOE underscores that:

"[I]f the private party makes three or more sales in a year, the purchase would be subject to use tax."

But how on earth does a purchaser know if the recently purchased sofa was sale #1 or sale #32? The California State Board of Equalization helpfully points out:

"Most Internet auction houses provide a sales history of the vendor, which may be useful in deciding whether the transaction qualifies as an occasional sale. To determine or obtain proof that a private party's sale to you is an occasional sale, you may have to contact the individual to find out if he or she has made three or more sales in a 12-month period. If so, you would have to report the use tax."

Really?

Snapshot

Pursuant to the California BOE Publication 177:

  • "Generally, a person in California who makes three or more sales of merchandise in a 12-month period is considered a retailer and required to hold a seller's permit. … When you sell merchandise in California, even temporarily, you are generally required to register with the .. BOE and to pay sales tax on your taxable sales."
  • If you sell your merchandise through Internet auction houses, "you are generally considered the retailer in your transactions … [and your sales] are generally subject to California sales tax."
  • Purchasers who were charged "a rate lower than your district's tax rate … are liable for use tax at the full rate in effect at the California location where you first store, use, or others consume the merchandise."
  • Purchasers are liable for California use tax on merchandise purchased "from an-of-state retailer… ."
  • Merchandise purchased "from a private party located out-of-state …[who] makes fewer than three sales in a 12-month period… [is] not subject to use tax since the sale is considered an occasional sale… ."
  • "[I]f the [out-of-state] private party makes three or more sales in a year, the purchase would be subject to use tax."

A 2010 article in The Fiscal Times entitled Craigslist, eBay Alert: The Tax Man Cometh points out that "[a]s online commerce grows, it is drawing increased attention from tax collectors." California BOE Publication 177 signals that some states are taking a more aggressive stance towards collecting sales and use tax from sales made through online auction houses.

It might just be easier to go down to the closest store and pay sales tax at the time of purchase.

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Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.