California: New Registration & Reporting Requirements (Use Tax)

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California has released a Special Notice alerting taxpayers to the new registration and reporting requirements for "qualified purchasers" to report and pay use tax directly to the Board of Equalization (BOE).

California Use Tax

Generally, use tax applies when a person or business in California purchases tangible merchandise to be used, consumed, given away, or stored in this state from a retailer outside of this state who does not collect California tax on the sale. In simpler terms, if sales tax would apply when a particular item is purchased in California, use tax applies when a similar purchase is made from a retailer outside the state and no tax is charged. Use tax is not a new tax. It has been a part of the Revenue and Taxation Code since the 1930's. Only the registration requirement is new under AB x4-18.

According to the notice, a "qualified purchaser" is a person that meets the following conditions:

  1. The person receives at least $100,000 in gross receipts from business operations per calendar year. Note: Gross receipts is the total of all receipts from both in-state and out-of-state business operations.
  2. The person is not required to hold a seller's permit or certificate of registration for use tax (under section 6226 of the Revenue and Taxation Code).
  3. The person is not a holder of a use tax direct payment permit as described in section 7051.3 of the Revenue and Taxation Code.
  4. The person is not otherwise registered with the BOE to report use tax.

When is a return due?

The return for 2009, along with payment, is due by April 15, 2010. Registrants are also being asked to report purchases for 2007 and 2008. The provisions of AB x4-18 impose a due date of April 15 for use tax reported by qualified purchasers.

However, the provisions of this bill do not change the due date for use tax liabilities from prior years. Therefore, returns for purchases made in 2007 and 2008 were due January 31, 2008 and January 31, 2009, respectively. Penalty and interest applies to payments received after the due date of each return period.

Can a" qualified purchaser" be relieved from penalty and interest charges?

The BOE may grant relief of penalty charges, but not interest, if it is determined that a person's failure to file a timely return or payment was due to reasonable cause and circumstances beyond the person's control. To request relief of penalty charges, a person may submit a completed BOE-735, Request for Relief of Penalty.


California has imposed these requirements to get California taxpayers to remit use tax on taxable purchasers where the seller has not charged sales tax. Tax has rarely been remitted to the state voluntarily on these types of purchases due to the difficulty in enforcing compliance.

Therefore, if you meet the conditions to be a "qualified purchaser," then you need to follow the new registration and reporting requirements or you may be subject to penalties and interest.

If you have any questions, please contact me at [email protected].

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