Use Tax: What Is It and What Do You Need to Know?

Use Tax: What Is It and What Do You Need to Know?

The Board of Equalization has begun auditing California businesses on use tax. If you haven’t received a letter requesting you to complete, file, and provide supporting purchasing documentation for all business expenses- it’s not long until you do.

Use tax is what you are required to pay if you make a purchase from an out-of-state business without being charged the California use tax. This is the same rate as the sales tax. Items that are subject to use tax include equipment, computers, office furnishings, promotional items, and other items purchased from another state for use in California. This includes purchases from other countries as well.

Take some time to look over your purchases of this nature for the years 2012 through 2014 to see how much you may owe. You can utilize the Use Tax Return worksheets (form BOE-403 CLW) to report this info. Owed use tax is to be paid to the Board of Equalization (BOE). If the items you purchased were for resale, and you have a California Sellers permit, you do not have to worry about use tax.

If you received a letter from the Board of Equalization regarding unpaid use tax, you will have received instructions for filling out the required forms, Use Tax Return worksheets, and which required documents to send for review.

Late use tax payments are subjective to a 10% penalty, and Failure to report use tax may result in an an audit from the Board of Equalization. You may request a Relief of Penalty once your documents have been reviewed through the eServices tab at

For help filing your use tax return and further questions, please contact Paragon Accountants.