Is Your Company Required to File a California Use Tax Return?

California Use Tax
Registration & Tax Return Filing
Why Your Company is Now Required to File a
Sales & Use Tax Return


Update:  The SBE has announced that if a company files 3 consecutive "zero returns," it will automatically be taken off the list of companies required to file.


California is desperate for tax revenue, so it has begun to enforce a law that's been on the books for decades.

When a California person or business buys anything without paying sales tax, you have always been required to report the purchase and pay use tax.  

The new enforcement push is on businesses because we tend to buy significant amounts of supplies and equipment, sometimes from out-of-state (internet) or second hand. 

Do I Have to File a Use Tax Return?
All businesses with annual gross receipts of at least $100,000 are required to file annual use tax returns with the SBE, even if you sell only services, no physical product. This impacts all types of businesses: corporations, LLCs,  sole proprietors / self-employed, nonprofits, and even rental property owners.

Once your business has sales of $100,000 in one year, you are required to file the use tax return every year thereafter until the business is dissolved.

If you already file sales tax returns, your only change will be to make sure that you enter either an amount or a zero on the use tax line of your sales tax return.  No separate return is required.

If the SBE identifies you as a business which did not file but should have, they will estimate what you owe and send you a bill for the tax plus 10%. 

What Do I Do First?
You will need an i.d. number in order to file a use tax return.  All registration is now done electronically at www.boe.ca.gov/elecsrv/esrvcont.htm.

Use tax returns must be filed electronically.  If you have any paperwork from the SBE, it will show your account number and express login code.  Otherwise, call (800) 400-7115 to get this information.

When Do I File the Use Tax Return?
The tax return is due on April 15th.  There are no extensions.

How Do I Pay the Tax?
As part of the e-filing process, you will be given an opportunity to pay by e-check, or you can print out a voucher to mail with a regular check.  Be sure to write your BOE account number on the check.  You may also pay by credit card.

If you filed late, owed tax, and were assessed a penalty, file a request for abatement.  So far, all requests for abatement of penalties have been granted.

Many of my clients (corporations, LLCs, self-employed, rental property owners) have me prepare their use tax returns as part of preparing their income tax returns.  This is very efficient, since I am already looking at information about purchases of supplies and equipment.

If you have questions / concerns about your use tax, especially if you are considering a large transaction, consider consulting an experienced CPA tax accountant.

Bess Kane, CPA
bess@besskanecpa.com

January, 2019