Tax News
New Use Tax Lookup Table

Since 1935, California law requires individuals and corporations to pay Use Tax on purchases made from out-of-state sellers, such as by telephone, Internet, mail, or in person if:

  • The seller does not collect California sales or Use Tax.
  • The item is used, given away, stored, or consumed in California.

Beginning in 2003, corporate and individual taxpayers have been able report Use Tax on their California income tax returns.

New this year is a lookup table in the instructions for Form 540/540A, California Resident Income Tax Return. Individuals may use this table to estimate Use Tax obligations on non-business purchases of less than $1,000. The estimated amount of Use Tax due is based on the taxpayers’ adjusted gross income. Use of the look-up table to calculate the Use Tax liability is optional. However, if the individual taxpayer properly uses the table, the BOE is not allowed to assess a liability against the taxpayer for additional Use Tax. Taxpayers can go to boe.ca.gov for more details.

Unfortunately, on occasion, corporate and individual taxpayers may make errors while preparing their income tax returns, or file late and incur penalty and interest charges. Presently, the law requires us to first apply payments to amounts owed for outstanding personal or corporate income taxes even when the taxpayer designates a portion of payments as Use Tax on their income tax return. Should this occur, we notify the BOE of the shortage of the Use Tax amount, and the BOE then sends correspondence to the taxpayer to explain the issue.

If additional income tax, penalty, or interest resulting from the error is greater than the designated Use Tax amount plus the income tax payments, the taxpayer is sent a Return Information Notice (RIN). The RIN explains:

  • The error.
  • That the Use Tax was used to pay the income tax owed.
  • Directions for how to now pay the Use Tax directly to the BOE.
  • How to pay any additional income tax, interest, or penalties to us.

Back to March 2012 Tax News