Why You Now Have to File Sales & Use Tax Returns

Good News Update: If your company files three "zero returns" in a row (meaning you owe no use tax), the State Board of Equalization (SBE) will automatically remove you from the filing requirement list.

California needs more tax money, so they're now enforcing an old law that's been around for decades. Here's the basic rule: When any California person or business buys something without paying sales tax, they're supposed to report it and pay "use tax" instead.

California is focusing on businesses because we typically buy large amounts of supplies and equipment, often from out-of-state sellers (like online) or used items where no sales tax was charged.

Do I Need to File a Use Tax Return?

Yes, if your business has annual sales of at least $100,000. This applies to all business types: corporations, LLCs, sole proprietors, self-employed people, nonprofits, and even rental property owners. It doesn't matter if you only provide services and don't sell products.

Once you hit $100,000 in sales in any year, you must file use tax returns every year after that until you close the business.

If you already file sales tax returns: You just need to fill in the use tax line on your regular sales tax return (either put an amount or zero). You don't need a separate form.

If the SBE catches you not filing: They'll guess what you owe and bill you for the tax plus a 10% penalty.

Getting Started

You need an ID number to file. Register online at www.boe.ca.gov/elecsrv/esrvcont.htm.

All use tax returns must be filed online. If you have SBE paperwork, it shows your account number and login code. If not, call (800) 400-7115 to get this information.

When to File

The return is due April 15th every year. There are no extensions.

How to Pay

When filing online, you can pay by electronic check or print a payment voucher to mail with a regular check. Make sure to write your BOE account number on the check. Credit card payments are also accepted.

Late Filing Tip: If you filed late and got penalties, ask for penalty removal. So far, they've been approving all penalty removal requests.