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California Lowers Use Tax Requirement Due to Online Sales Tax


 California: Amazon tax impacts use tax requirements.

Last September 15, use tax on sales made to California residents, and to remit the tax to the state.

California lawmakers and representatives from the Board of Equalization were quick to point out that AB 155 did not create a new tax. California residents have been required since 1935 to remit use tax when California sales tax isn't paid on taxable purchases. Example: Californians are required to pay use tax after an Oregon shopping spree, and they're supposed to pay use tax on their taxable online purchases. But since September 15, 2012 (when AB 155 took effect), some of that use tax is being collected by remote retailers, such as Amazon.com, at the time of sale.

Recognizing that many people don’t know about their use tax obligations, the California State Board of Equalization has gone to great lengths to educate the public. And since it is unreasonable to expect most people to save all their receipts and remit the exact amount of use tax owed, use tax is determined based on a person’s adjusted gross income (AGI) and spending data published by the United States Census Bureau.  For example, a person making less than $20,000 annually should have paid $7 in use tax in 2011, while a person making between $150,000 and $199,000 was expected to pay $123 in use tax.

Recently, the California BOE adjusted the use tax table to reflect the fact that more sales/use tax is now being collected by retailers because of AB155. For the year beginning June 1, 2012, BOE calculated the use tax liability factor by multiplying the percentage of income spent of taxable purchases for the preceding calendar year by 0.37. For the year beginning June 1, 2013, however, “BOE shall calculate the use tax liability factor … by multiplying the percentage of income spent on taxable purchases for the preceding calendar year by 0.23….”

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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.