California Changes Use Tax Registration Requirements for Businesses with AB 1097
If you buy taxable items from out-of-state sellers for use in California who do not charge you California sales tax, you may have to register and pay use tax to the state under a new law (Assembly Bill 1097) that is expected to last until January 1, 2029.
Use tax is the tax you pay when you buy items from out-of-state sellers who do not collect California sales tax. You are supposed to report and pay use tax on your purchases on an annual basis if you are deemed a qualified purchaser.
Who would be considered a Qualified Purchaser for California’s Use Tax Registration requirements?
A qualified purchaser is a person who meets certain criteria and is required to register with the California Department of Tax and Fee Administration (CDTFA) to facilitate the collection of use tax. According to AB 1097, a “qualified purchaser” would be a person who meets all of the following conditions:
- The person is not required to hold a seller’s permit pursuant to this part.
- The person is not required to be registered pursuant to Section 6226.
- The person is not a holder of a use tax direct payment permit as described in Section 7051.3.
- The person makes more than ten thousand dollars ($10,000) in purchases subject to use tax per calendar year and that tax has not otherwise been paid on those purchases to a retailer engaged in business in this state or to a retailer who is authorized by the department, under the rules and regulations as it may prescribe, to collect the tax.
- The person is not otherwise registered with the department to report use tax.
That said, there is one exception where if a person purchased a vehicle, vessel, or aircraft as defined in Article 1 (commencing with Section 6271) of Chapter 3.5, they would not be considered a “qualified purchaser."
Overall, if you meet the conditions listed above, you are considered a qualified purchaser and must register with the CDTFA.
How long will California’s use tax registration requirements outlined AB 1097 last?
This change is expected to last until January 1, 2029, unless extended by another law. The CDTFA will notify you by mail if you are identified as a qualified purchaser based on your tax returns or other information. Once you are registered, you will have to file a use tax return and pay the tax due by April 15 of each year.
If you are not sure whether you are a qualified purchaser or how to register and file use tax returns, you can visit the CDTFA website for more information and guidance. You can also contact the CDTFA customer service center at 1-800-400-7115 or your local CDTFA office for assistance.