Use tax is a tax imposed by state taxing authorities on the purchase of goods outside the taxpayer’s state of residence when sales tax is not collected on the transaction. Use taxes are generally designed to discourage the purchase of goods that are not subject to sales tax.
In California, use tax applies to the purchase of goods from out-of-state sellers (including online, mail order, or telephone purchases) for use in California when the seller does not collect California sales tax. This is designed to level the playing field between in-state and out-of-state retailers, ensuring that California businesses are not at a competitive disadvantage. The use tax rate is the same as the sales tax rate in effect for the location where the item is used, stored, or otherwise consumed. Consumers are responsible for paying use tax directly to the California Department of Tax and Fee Administration (CDTFA) if it was not collected at the time of purchase. Use tax also applies to leases of tangible personal property. Taxpayers can report and pay use tax on their California income tax return or through the CDTFA's online services.
