We all know about sales tax. It is a tax paid whenever we purchase something. The tax is some percentage of a purchase price. Do you know about use tax? Use tax is similar to sales tax, and it applies whenever you buy, lease, or rent items without paying sales taxes. This tax is based on the price, and the rate is the same as the sales tax rate.
Did you make Internet purchases or buy something from an out-of-state mail order vendor? You may owe use tax. According to the Franchise Tax Board (FTB) and the Board of Equalization (BOE):
- The majority of businesses have a use tax liability.
- The most frequent assessments made in audits involve unreported use tax.
The fact sheets below from the FTB and BOE provide more information.
California Use Tax Information