Publication 177, Internet Auction Sales and Purchases

January 2017

  • Internet Sales And
    Permit Requirements
  • District Taxes
  • Use Tax On
    Out-of-State Purchases
  • Shipping And
    Delivery Charges
  • Sales Delivered
    Outside California
  • Additional Information

Interstate sales and permit requirements

There is no general tax exemption for sales made over the Internet. Thus, Internet sales of tangible personal property are generally taxable in California. Sales and use tax applies to Internet sales in the same way as sales made at retail stores or other outlets, through sales representatives, over the telephone, or by mail order. Please see publication 109, Internet Sales. “Tangible personal property” (merchandise) means personal property which may be seen, weighed, measured, felt, or touched, or which is in any other manner perceptible to the senses.

California permit requirements

Generally, a person in California who makes three or more sales of merchandise in a 12-month period is considered a retailer and required to hold a seller's permit. This is true regardless of whether the sales are at retail or for resale or delivered outside California, unless you make no sales in this state. When you sell merchandise in California, even temporarily, you are generally required to register with the Board of Equalization (BOE), and to pay sales tax on your taxable sales. Please see publication 107, Do You Need a California Seller’s Permit?

If, through Internet auction houses you list your merchandise to sell, seek bids, accept a bid from the highest bidder, and transfer the merchandise to the purchaser, you are generally considered the retailer in your transactions. This is true whether you receive the funds or have another party, such as PayPal®, collect the funds on your behalf.

Sales by retailers made through Internet auction houses, such as eBay and uBid, or sites that offer online classified advertisements (online advertisers) such as Craigslist and Amazon, are generally subject to California sales tax. Internet auction houses differ from most online companies by offering a service to other retailers allowing them to post their merchandise for sale on its site. Businesses like eBay, uBid or Craigslist are generally not considered retailers and are not responsible for collecting tax on those transactions. These businesses aid sellers and sales are the responsibility of the holder of the property.

Note: This publication summarizes the law and applicable regulations in effect when the publication was written, as noted above. However, changes in the law or in regulations may have occurred since that time. If there is a conflict between the text in this publication and the law, decisions will be based on the law and not on this publication.

District taxes - Sellers

If you are an Internet seller “engaged in business” in California and you are engaged in business in a district that imposes a transactions and use tax (district tax), you must report and pay district taxes to that district (see publication 44, District Taxes). However, if you are not engaged in business in a district, you are not required to report and pay district taxes imposed by that district, but you must still report and pay tax at the statewide rate, please see California City & County Sales & Use Tax Rates. Generally, if you are not engaged in business in a district and you ship by common carrier into the district, your customer is liable for the district use tax. As a courtesy to your customer, you may choose to collect the district use tax from them. If you do, it should be shown on the customer’s invoice and you must report it on your return.

You are considered “engaged in business” in a district if you, for example:

  • Own or lease any real or tangible personal property in the district.
  • Have any type of office, sales room, warehouse, or other place of business in the district, even if it is used temporarily or through an agent or subsidiary.
  • Have a representative operating in the district for purposes of making sales or deliveries, installing or assembling tangible personal property, or taking orders.
  • Receive rent from the lease of tangible property located in the district.
  • Sell or lease vehicles or undocumented vessels which will be registered in the district.

If you store inventory at various locations in California (at Internet auction houses’ fulfillment centers for example), you are considered engaged in business in those districts where your inventory is located.

When you are engaged in business within a district you are responsible for reporting and paying that district’s sales and use tax, even if you do not collect it from your customer. Alternatively, if you collect excess district tax or tax reimbursement from your customer, you should either:

  1. Refund to your customer the over-collected amount, or
  2. Report and pay the over-collected amount on your sales and use tax return.

Applying one tax rate on all sales in California, such as an average combined tax rate for all districts in California, is not an accepted method of collecting tax or tax reimbursement. A retailer should not knowingly collect more sales tax reimbursement or use tax than the customer owes on a particular transaction, which will occur when the single rate is higher than the actual rate of tax that applies to the transaction. When the single rate is less than the actual rate on a particular transaction, as stated above, the retailer who is engaged in business in the district(s) remains liable for the entire amount of district tax owed, not just the amount collected from the customer.

District taxes-Purchasers

When making purchases, be sure to verify the tax rate that applies to your purchase. As stated above, generally, if the property is shipped by common carrier to you in your “home” district, the district use tax applies. So if you purchase tangible personal property through an Internet auction for storage, use or other consumption in a district and the seller only charged you tax at the statewide rate, in most cases you will be liable for the additional district use tax*.

Tax applies to vehicles purchased over the Internet in the same manner as those purchased from a vehicle dealer or private party. Please refer to Regulation 1610, Vehicles, Vessels, and Aircraft, and publication 34, Motor Vehicle Dealers.

For district tax requirements on sales and purchases see publication 44, District Taxes, and publication 105, District Taxes and Delivered Sales. For tax rates, see California City and County Sales and Use Tax Rates. Please refer to or our “For more information” section for BOE information and all regulations and publications referenced in this publication.

*Note: If you do not hold a California seller’s permit, you can report and pay use tax on your California income tax return. You may also report your purchase(s) subject to use tax, including any additional district use tax you may owe, on the BOE's website at by selecting New Registration, and then select "Pay use tax and/or the lumber products assessment on one time purchase." Once you have registered, you may pay any use tax due by filing your return. You can also register to report use tax in person at any of the BOE field offices. Please contact the BOE Customer Service Center for assistance at 1-800-400-7115. If you have a California seller’s permit, select New Registration, only to report personal purchases not related to your business.

If you are a business that holds a seller’s permit, you can report and pay use tax for your business purchases when submitting your return under “Purchases subject to use tax.”

District tax example

You purchase merchandise from an online seller who charges sales tax at the statewide rate (7.25 percent). The seller ships the merchandise to you in a special tax district where the total sales and use tax rate is 8.75 percent. You (the purchaser) are liable for the additional 1.50 percent district tax in the special tax district.

Use tax on out-of-state purchases

When you purchase merchandise from an out-of-state retailer, you are liable for the use tax due on your out-of-state purchases. The use tax rate is the same as the sales tax rate for any given California location.

Whether the seller charges a lump-sum price or itemizes the merchandise price and other charges, tax is due on the entire purchase price. Any service fees related to a taxable sale are generally taxable, however, shipping and delivery charges may not be taxable (see “Shipping and delivery charges”).

Generally, if you purchase merchandise from a private party located out-of-state and he or she makes fewer than three sales in a 12-month period, the purchase would not be subject to use tax since the sale is considered an occasional sale. However, if the private party makes three or more sales in a year, the purchase would be subject to use tax.

Most Internet auction houses provide a sales history of the vendor, which may be useful in deciding whether the transaction qualifies as an occasional sale. To determine or obtain proof that a private party’s sale to you is an occasional sale, you may have to contact the individual to find out if he or she has made three or more sales in a 12-month period. If so, you would have to report the use tax.

Shipping and delivery charges

Tax does not apply to separately stated charges for delivery of property from the retailer’s place of business or other point from which shipment is made directly to the purchaser, provided the delivery is by other than the facilities of the retailer (by United States mail, independent contract or common carrier). Handling charges are a service related to the sale and are subject to tax when related to a taxable sale. Please see publication 100, Shipping and Delivery Charges.

A retailer selling merchandise for an artificially low price and then charging an excessive amount for “shipping” without payment of tax on the excessive shipping charge would be understating taxable sales. Since the law provides that only the actual cost of shipment is exempt from tax, the difference between the actual cost of shipment and the amount charged for shipping would be subject to tax.

Sales delivered outside California

Sales tax generally does not apply to your transaction when you sell a product to a nonresident of this state, and under an agreement with the purchaser, ship it directly to the purchaser at an out-of-state location, for use outside California. Please see publication 101, Sales Delivered Outside California.

Additional Information

For more information

BOE regulations, publications, and additional information are available on the BOE website or by calling the BOE Customer Service Center at 1-800-400-7115.


1595 Occasional Sales–Sale of a Business–Business Reorganization

1610 Vehicles, Vessels, and Aircraft

1620 Interstate and Foreign Commerce

1684 Collection of Use Tax by Retailers

1685 Payment of Tax by Purchasers

1686 Receipts for Tax Paid to Retailers

1699 Permits

1700 Reimbursement for Sales Tax

1823 Application of Transactions (Sales) and Use Tax

1827 Collection of Use Tax by Retailers (for special district taxes)


34 Motor Vehicle Dealers

44 District Taxes

100 Shipping and Delivery Charges

101 Sales Delivered Outside California

105 District Taxes and Delivered Sales

107 Do You Need a California Seller's Permit?

109 Internet Sales

110 California Use Tax Basics