California Use Tax Tips, Updated
- Mar 3, 2014 | Gail Cole
Use tax is a hot topic on state department of revenue websites these days. More and more, states are taking pains to remind taxpayers of their use tax obligations. As use tax is imposed upon buyers rather than sellers, use tax compliance is difficult to enforce. This is particularly true among individuals. While business use tax liabilities tend to surface during audits (sometimes joined by expensive fines and penalties), individual compliance relies on a well-informed, law-abiding citizenship. Thus the California State Board of Equalization’s recent reissuance of numerous use tax information bulletins.
The most recent updated publications are:
- #110, California Use Tax Basics;
- #122, Buying and Selling Dogs, Cats, and Other Nonfood Animals; and
- #178, Voluntary Disclosure Program.
Use Tax Basics
This publication stresses that use tax is imposed upon “the use, storage or other consumption” of taxable merchandise. It was created to protect California merchants from out-of-state competition (since prices without taxes are lower than prices with taxes). In today’s world, out-of-state competition can be found in many homes and businesses in the form of online and mail-order retailers.
Buying and Selling Dogs, Cats and Other Nonfood Animals
Individuals or businesses selling more than two pets or other nonfood animals in a twelve-month period are required to obtain a sellers permit and collect, remit and report California sales tax.
Anyone who purchases a pet or “other nonfood animal” from outside California must pay use tax on that purchase. The same is true for any animal-related products purchased out-of-state or remotely, such as kennels, beds, cages, and so forth. Taxpayers with a California seller’s permit should pay use tax under “Purchases Subject to Use Tax” on the sales and use return. Otherwise, the purchase should be reported on the California state income tax return or directly to the BOE via its website.
The notice also delves into the taxation of food and medication for pet and other nonfood animals.
Voluntary Disclosure Programs
The BOE administers two distinct voluntary disclosure programs:
- The In-State Voluntary Disclosure Program, for in-state purchasers reporting use tax on purchases of tangible personal property from out-of-state retailers; and
- The Out-of-State Voluntary Disclosure Program, for out-of-state businesses reporting use tax on sales to consumers in California.
Participation in either program comes with benefits:
- Limits the time the BOE can make an assessment for use tax to the three prior years (as opposed to eight years);
- Allows the BOE to waive penalties accumulated from late filing and late payment; and
- Allows applicants to describe their circumstances anonymously and obtain a written opinion from the BOE.
If you sell or buy in California and sometimes don’t pay or collect sales tax, it may be time to brush up on your use tax obligations.
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