Know about this California user tax?

Article from SF Gate, 2/18/10, "Net Worth", Kathleen Pender

http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2010/02/18/BUVQ1C33I3.DTL

Not bought in California, no tax no problem, pay California Tax. The State probably won't find your small internet purchase yet, but most small businesses not holding a seller's permit are affected.

From SF Gate article....

Businesses that sell tangible goods collect sales tax and are already registered with the board, so the new law applies mainly to service businesses. The new requirement was quietly slipped into a state budget-balancing bill that passed in late July. It applies to any California business owner - including landlords and the self-employed - with more than $100,000 a year in gross receipts who is not required to hold a seller's permit or certificate of registration for use tax.

Since the 1930s, individuals and businesses in California have been required to pay use tax when they purchase goods from out-of-state vendors who are not required to collect sales tax because they have no offices or employees in California. The use tax rate is generally the same as the buyer's local sales tax rate. State income tax returns have a line where individuals and businesses are supposed to report their use tax, but it is generally ignored.

The Internet has made it much easier to purchase goods without sales tax. The board's staff estimated the new requirement would bring in $89 million the first fiscal year, rising to $651 million by year five. Although the bill applied to only those purchases made during 2009, the board has the authority to impose taxes going back eight years (longer if fraud is involved). However, the board will require use-tax returns to be filed only for purchases made in 2007, 2008 and 2009. Businesses with more than $100,000 in gross receipts in any year are required to register with the board and file use tax returns by April 15, even if their use-tax liability is zero and even if they did not receive the letter.

Sate income tax returns have a line where individuals and businesses are supposed to report their use tax, but it is generally ignored. The Internet has made it much easier to purchase goods without sales tax. The board's staff estimated the new requirement would bring in $89 million the first fiscal year, rising to $651 million by year five.

Posted by Kathy Meeh