Scott B. Price, CPA

Notice: Businesses Must File With CA BOE

October 28, 2009

The California State Board of Equalization (BOE) has been mailing out use tax letters to businesses with at least $100,000 in business gross receipts who are not already registered with the BOE and do not hold a seller’s permit. This means that all business, regardless of business type must now register with... the BOE.

You may have received a letter from the BOE, which indicates that the BOE has identified your business as a qualified purchaser subject to a use tax return filing requirement (even if no tax is due). If you have received the letter you must complete the contact info section of the letter and mail it back to the BOE. The BOE will then register the business and send out an account number with log-in information so the use tax return can be e-filed. The 2009 returns are due on April 15, 2010.

Below are some FAQ questions and answers from the BOE website to help you determine what is subject to use tax:

California Use Tax Basics

California’s sales tax generally applies to the sale of merchandise, including vehicles, in the state. The state’s use tax applies to the use, storage, or other consumption of those same kinds of items in California. While use tax was originally put in place to protect California merchants from unfair out-of- state competition, it also applies to certain purchases made within the state.

When does use tax apply?

Use tax generally applies when you buy merchandise that will be used, stored, consumed, or given away in this state, under certain circumstances. Use tax is based on an item’s purchase price and generally applies to:

• California consumer or retailer purchases from out-of-state vendors (including foreign merchants) who do not collect California tax on their sales (see Please Note, below) unless the purchase is otherwise subject to an exemption or exclusion.

• Retailer’s use of items purchased under a resale certificate, including: withdrawing items from inventory for personal or business use, using an item before sale, or using an item in manufacturing unless it becomes a physical part of the final product sold. Demonstrating or displaying an item is generally not a taxable use provided the item remains for sale.

• Purchases of vehicles, vessels, mobile homes, and aircraft from sellers who do not hold seller’s permits.


Exemption for items purchased in a foreign country

The first $800 of tangible personal property that is both purchased from a retailer in a foreign country by an individual and personally hand-carried into this state from the foreign country within any 30-day period is exempt from use tax. This exemption does not apply to property sent or shipped to this state.

Who is responsible for paying the use tax, and when is it due?

Generally when you buy an item that is used, stored, consumed, or given away in California you owe use tax. In some cases, sellers must collect use tax from their customers and pay it to the Board of Equalization (BOE) If you are not required to hold a seller’s permit, your payment is generally due on or before the date your personal income tax return for the year in which the item is used, stored or consumed is due to the Franchise Tax Board. If you hold a seller’s permit or consumer use tax account, your due date is the due date of your return. State Board of Equalization October 2008 For additional information you may download regulations, forms and publications from the BOE website: www.boe.ca.gov

If you have any questions, please feel free to call or contact Jennifer Kuhlmann.