Tax Guide for Out-of-State Retailers

We created this guide to help out-of-state businesses better understand their sales and use tax obligations when conducting business in California. We recognize that understanding tax issues in California can be time-consuming and complicated. We want to get you the information needed so that you can focus on starting and growing your business in this state.



How to Use This Guide

Out-of-State Retailer

Each section of this guide contains information relevant to doing business with California. The Registration section provides important information related to registration, types of accounts that may be required, filing returns, account maintenance, and other important information you need.

The Doing Daily Business section cover the most common topics in an at-a-glance format that can be expanded to provide more extensive information if you need it.

Lastly, the Resources section provides links to a wealth of information, including web-based seminars, forms and publications, statutory and regulatory information, and access to live help from our customer service representatives.

Please note that the information included is general in nature and is not intended to replace any law or regulation.



Out-of-State Retailer

If You Need Help

If at any time you need assistance with topics included in this guide – or with other topics we may have not covered – feel free to contact us by telephone or email. Contact information and hours of operation are available in the Resources section.

If you have suggestions for improving this guide, please contact us via email.

Registration

Although you are not located in California, you may be required to register with the Board of Equalization (BOE) to collect and report tax on your sales to California customers.

Do You Need to Register with California?

You are required to register with the BOE if you are considered “engaged in business” in California.

Even if you are not required to register, you may voluntarily register to collect and pay use tax as a convenience to your California customers.

How Do You Know if You Are Engaged in Business in California?

There are six common ways in which you can be considered engaged in business in California. If any of the following situations apply to you, you are required to collect and pay sales and/or use tax.

  • You have physical presence in California, i.e. maintaining inventory or office locations.
  • You have representatives operating in California for purposes of taking orders, making sales or deliveries, installing, or assembling tangible personal property.
  • You receive rental payments on leased personal property located in California.
  • You lease machinery or equipment including, but not limited to computer servers located in California.
  • You are a member of a commonly-controlled group which helps you establish or maintain a California market for sales of products, including but not limited to design and development of products you sell, or solicitation of sales of personal property on your behalf.
  • You have agreements with affiliates in California who solicit customers and you compensate them based on completed sales, provided:
    • You have $10,000 in sales to California customers through referrals from California-based affiliates, and
    • You sold more than $1 million in products to California consumers in the preceding 12 months.

Did you receive a BOE 790 Sales Activity in California questionnaire?

Your business activities in this state may require you to register under the State of California Sales and Use Tax Law.

  • Complete and return this questionnaire to the address provided.
  • If you have any questions regarding the questionnaire or registration, a contact person, phone number, and email address are provided at the bottom of the form you received.

For more information see Regulation 1684, Collection of Use Tax by Retailers, Revenue and Taxation Code 6203, Collection by Retailer, and AB155 FAQ's.

Convention Shows

There is an exception to being "engaged in business" when you are only involved in convention and trade shows in California.

If your presence in California for conventions or trade shows is not more than fifteen days, in whole or in part, during any 12 month period and you do not derive more than $100,000 of net income during the prior calendar year from these shows, you are not considered "engaged in business" in California and you are not required to register for an ongoing permit. You must still collect and remit the use tax on the sales made during the event even though you are not required to hold an ongoing permit. You should obtain a temporary permit for reporting tax on sales made during the event.

Voluntary Disclosure

If you are an out-of-state business that sells to consumers in California but are not registered, you are encouraged to apply for participation in the voluntary disclosure program.

Voluntary disclosure provides taxpayers with the following benefits:

  • Limits the statutory period for assessments against unpaid tax to three years instead of eight.
  • Allows us to waive late filing and late payment penalties.
  • Allows taxpayers to anonymously obtain a written opinion regarding whether you will be approved for a voluntary disclosure request.

To qualify for this program, you must meet the following five conditions:

  • Be located outside California and cannot have been previously registered with the BOE;
  • Be engaged in business in California.
  • Register voluntarily with the BOE;
  • Have not been previously contacted by the BOE or its agents regarding its activities in California; and
  • Failure to pay the tax or file a return was due to reasonable cause and not as a result of negligence or intentional disregard of the law.

The voluntary disclosure program is not applicable to cases involving:

  • Any purchases subject to the California use tax.
  • Sales by persons, registered or unregistered, which are subject to California sales tax.
  • Any person holding or who held a seller's permit.

How to Request a Written Opinion

To request an opinion as to whether or not we would be inclined to approve a voluntary disclosure request or to discuss your eligibility for consideration under these programs, please contact the Voluntary Disclosure Specialist at the following address:

Board of Equalization
Voluntary Disclosure Program
PO Box 942879 (MIC: 44)
Sacramento, CA 94279-0044
1-916-324-2883
1-916-322-0187 (fax)
voluntary.disclosure@boe.ca.gov (e-mail)

To receive the most accurate response possible to your request, please include the following:

  • A description of how you meet all of the qualifications listed above.
  • A description of your business activities, including how products are marketed and sold to California customers.
  • A detailed description of the flow of goods to the customer from the time an order is placed.

How Do You Apply for Voluntary Disclosure?

  • Complete the online registration, and
  • Complete a Form BOE-38, Application for Out-of-State Voluntary Disclosure within thirty (30) days of registration.
  • Completed forms may be sent to the following address:
  • State Board of Equalization
    Out-of-State District Office
    3321 Power Inn Road, Suite 130
    Sacramento, CA 95826-3893

We will provide you with a Client ID Login Code to file your tax returns. Payment may be made online at the time of filing or mailed with a printable voucher.

You will be notified in writing whether or not you have been accepted into the Voluntary Disclosure Program.

For more information, please see Publication 178, Voluntary Disclosure Program, and Revenue and Taxation Code 6487.05, Deficiency determination; unregistered out-of-state retailers.

California Tire Fee

The California Tire Fee is a fee imposed upon the purchase of a new tire. The BOE administers the program on behalf of the Department of Resources Recycling and Recovery (CalRecycle) and the California Air Resources Board (ARB).

If you are required to have a California seller’s permit or Certificate of Registration — Use Tax, you must register for a California Tire Fee account and collect the fee when you sell tires to California retail customers. If you are not sure whether you need to register and collect sales or use tax, see our Tire Fee Program page for more information, or call our Customer Service Center at 1-800-400-7115 (TTY:711).

If you are not required to register for a tire fee account, you may voluntarily register to collect and pay the tire fee as a courtesy to your California customers. Upon collecting the tire fee, you must provide the customer with an invoice or similar document that lists the tire fee as a separate charge. A copy of the invoice or similar document should be retained by both the seller and purchaser.

If you do not have a California tire fee account, the California purchaser must pay the fee directly to the BOE.

Cigarette Tax Program

Under federal law (the Jenkins Act), if you ship cigarettes to California customers you must inform the BOE.

You must provide the buyer’s name and address, the brand, and quantity of cigarettes sold or transferred.

Covered Electronic Waste Recycling Fee

If you sell a covered electronic device (CED) to a California customer and you are required to hold a California seller's permit or are registered, or should be registered, to collect California use tax, you owe the fee. If you are not required to collect the fee, your customer owes it.

If the sale is subject to California sales tax, and the item is a CED, the eWaste fee is due. For more information visit Covered Electronic Waste Recycling Fee.

Alcoholic Beverage Tax

Commercial winegrowers who sell and ship wine directly to California customers must have a wine direct shipper permit.

The permit allows winegrowers to ship up to two cases of wine per month directly to a California resident for personal use. The buyer must be at least 21 years old and may not resell the wine.

Permits must be obtained from the California Department of Alcoholic Beverage Control.


Registration

Online Registration – Register with us for your seller's permit or other necessary permits, or add a business location to an existing account.

Note: You may be contacted for verifying documentation (Copies of Driver's Licenses, Articles of Incorporation, etc.) before your registration can be finalized and an account issued.

Filing and Payments

After you have registered you may find these links helpful.

Notice of Business Change – Keep your information current by using the links below and notifying us of any business changes.

Doing Daily Business

Sales tax applies to sales of tangible personal property made within California. The use tax applies to the use, storage, or other consumption of tangible personal property purchased from a business located outside the state for use in California. As a registered out-of-state retailer, the tax you collect will generally be the use tax.

Resale Certificates

If you sell property to a California customer who plans to resell the item(s) in the normal course of business, you are not required to collect any sales or use tax provided the sale is properly documented. However, you may be required to register and file returns if you have nontaxable sales.

Once you register, you may accept a resale certificate, in good faith, from your California purchaser that relieves you of the liability to collect and report the sales or use tax.

The certificate may be in any form, must be timely, and it must contain:

  • The name and address of the purchaser.
  • The number of the seller’s permit or a note indicating why they are not required to hold a seller’s permit.
  • The description of the property to be purchased.
  • A statement indicating the property is being purchased for resale.
  • The date of the document.
  • The signature of the purchaser or someone authorized to act on their behalf.

Timely is considered to be:

  • Before you bill the purchaser for the property
  • At any time within your normal billing cycle
  • At any time prior to delivery of the property to the purchaser.

For your convenience, you can download or print form BOE-230

You should always note the general character of the purchaser’s business and question the use of certificates presented for items not normally sold in their line of business. You should not accept a certificate if you know or have reason to believe the property is being purchased for other than resale. You can verify whether the seller’s permit supplied on the resale certificate is current by looking it up on our website at Permit, License or Account.

For more information, please see publication 103, Sales for Resale.

Exemptions

In California, all sales are taxable unless the law provides a specific exemption. Similarly, use tax applies to the purchase of tangible personal property purchased outside of California that will be used, consumed, stored, or given away in this state, provided no tax was paid at the time of purchase.

Exemptions claimed should be properly documented. California has specially prescribed exemption certificates for certain kinds of property or transactions. Sample exemption certificates can be reviewed on our website.

Some common exempt sales transactions include:

Sales to Other Retailers

When you sell to California customers who plan to resell the property, you may accept a resale certificate and be relieved of the obligation to collect and report tax. For more information, see Sales for Resale.

Nontaxable Sales of Food Products

Sales of food for human consumption are exempt from sales tax. Sales of food served as meals, consumed on premises, or sold at places where admission is charged are generally taxable.

For more information on how tax applies to food sales, please see our Tax Guide for Restaurant Owners or our Tax Guide for Grocery Stores.

Sales to the United States Government

Your sales and leases made to the United States Government and its instrumentalities are generally exempt from California sales and use tax.

The following documentation must be retained to support the tax exempt sale:

  • Purchase orders
  • Copy of U.S. government credit card or credit card number
  • Documents showing direct payment by the U.S. government
  • Shipping and related documents to substantiate that the merchandise was sold to the U.S. government and not an individual in the armed service

Keep in mind that this is only the United States government. State, city, and county government agencies are not exempt from sales tax. For more information, see publication 102, Sales to the United States Government.

Nonprofit Organizations

Nonprofit and religious organizations are exempt from federal and state income tax; however, they are not generally exempt from sales tax. There are some exceptions, for more information see our Nonprofit Tax Guide.

Manufacturing

Beginning July 1, 2014, purchases of manufacturing and research and development equipment may be partially exempt from sales and use tax. The purchaser must meet certain conditions and provide a partial exemption certificate to the retailer. For more information on this exemption see Manufacturing Exemption.

Other Partial Exemptions

Partial exemptions are transactions exempt from the state portion of the sales and use tax rate. To claim a partial exemption on your return, you must obtain a valid and timely partial exemption certificate from your customer. Below is a list of the most common partial exemptions:

Exemptions can vary between states, for complete information on California exemptions see publication 61, Sales and Use Taxes: Exemptions and Exclusions.

Drop Shipments

If you drop ship items into California, you may be responsible to collect and report the tax.

A drop shipment generally involves two separate sales. First, a retailer not engaged in business in California, makes a sale to a California customer. They are the “true retailer”. The true retailer then purchases the property from a supplier and requests that supplier (the drop shipper) to directly ship the item to the customer on their behalf. The true retailer never physically possesses the property.

When a true retailer uses a drop shipper that has nexus in California, the drop shipper becomes the retailer and they are responsible for collecting and reporting the tax. Tax is based on the amount the retailer invoices the California customer.

The retailer may accept a valid resale certificate from the California customer if the property is being purchased for resale. For more information, see regulation 1706, Drop Shipments.

Delivery and Shipping Charges

Tax does not apply to separately stated delivery charges when delivery is made by common carrier, U.S. mail, or an independent contractor as long as the cost is the actual charge for the delivery.

Tax generally applies to delivery charges when delivery is made using your own vehicles. See publication 100, Shipping and Delivery Charges for more detailed information.

Use Tax

Use tax is collected on your sales to California customers, however, there may also be situations in which you will report use tax for yourself.

Use tax applies to property used, consumed, given away, or stored in California. For more information, see publication 110, California Use Tax Basics

Inventory withdrawals

If you maintain inventory in California, and you remove inventory items for use in your business operations located in this state, you are responsible to report and pay use tax on your cost of the item.

Items purchased for use at California locations

If you have items shipped to your California business locations for use, such as equipment or office supplies, you must report use tax on the items if the seller did not charge you California sales or use tax. Report the cost of the items under “Purchases subject to use tax” on your sales and use tax return.

If you paid sales or use tax at the time of purchase, to another state and subsequently store, use, or otherwise consume the items in California, you are allowed to claim a credit for the amount of tax paid to the other state. The credit may not to exceed the amount of use tax you report.

Samples

When you or your representatives give away items, such as samples or gifts in California, you are the consumer of those items and will be responsible for reporting the use tax on your cost of those items.

If you ship these types of items directly to a customer from a point outside of California using a common carrier, use is considered to have occurred outside of California and you will not report use tax.

District and Local Taxes

The current standard California statewide sales and use tax rate is 7.50 percent. However, the sales and use tax rate is not the same throughout California. Total sales and use tax rates are higher in areas where there are voter-approved district taxes.

In those districts, the total tax rate includes the standard statewide tax rate plus the district tax rate (which varies from district to district). Current tax rates can be easily verified on our website.

As a retailer, you are required to collect and report district tax if you are engaged in business in a district. You are considered engaged in business in a district if any of the following applies:

  • You have any kind of permanent or temporary business location in the district, including a warehouse, salesroom, or office
  • You have any kind of representative or agent in the district, even temporarily, who makes sales, takes orders, or makes deliveries for you
  • You use your own delivery vehicles to regularly deliver merchandise into or within the district
  • You receive rental income from the lease of merchandise located in the district.

Local tax is generally reported at the location where you have your permanent place of business. When you are not located in California, but have inventory in this state, the local tax is reported to the area where the property is shipped from.

When you have no location in this state and no inventory, the local tax is due based on the location where the property is delivered. You must allocate your sales to the correct locations on your sales and use tax return.

Recordkeeping

When you hold a California seller’s permit or other BOE license or permit, you are required to maintain your business records to verify that you have properly paid the tax or fee.

Records must be kept for at least four years. If you are being audited, retain all records that cover the audit period until the audit is complete, even if it is longer than four years.

Your records should be adequate so BOE representatives may:

  • Verify the accuracy of your tax or fee returns; and
  • Determine if you have correctly paid the tax or fee due on your sales and purchases.

Your records need to show:

  • The gross receipts from all of your business income, including sales, leases, service charges, and labor income
  • All of the deductions claimed on your sales and use tax returns, along with supporting documents for those deductions
  • The total purchase price, including receipts, for all items you purchase for resale, lease, or your own use.

The level of detail required varies by industry. Records need to be adequate enough so the BOE may determine the date of sale, what you sold, all taxable and nontaxable charges, and how much tax was applied to the sale. It is important that you keep all documents that support nontaxable sales.

Your Sales and Use Tax records should include, but are not limited to:

  • Normal books of account that show your business income and expenses.
  • Documents of original entry, such as invoices, receipts, job orders, purchase orders, contracts, or other documents used as the basis for your books of account; and
  • All schedules or working papers used in preparing your tax or fee returns.
  • Ledgers and sales summaries
  • Receipts and/or guest checks, invoices, cash register tapes
  • Paid bills and other documents that support the ledgers and summaries
  • Statements of taxes or fees collected
  • Resale certificates accepted, tax paid on purchases, tax paid, bank records, and records supporting your exemptions from sales and use tax.

Other taxes and fees programs have their own record keeping requirements. For specific information on record keeping for other taxes and fees, please see Special Taxes and Fees Programs

For more information, please go to Keeping Records or view our tutorial video Sales and Use Tax Record Keeping Requirements.

Resources

Need to know more? Follow the links below for more information about the topics covered in this guide, as well as other information you might find helpful.

Out of State Offices

The Board of Equalization has one main office that administers accounts located out of state:

Main Out-of-State Office
Sacramento

3321 Power Inn Rd., Ste. 130
Sacramento, CA 95826-3893

1-916-227-6600
FAX 1-916-227-6632
Registration FAX 1-916-227-6641
email – OHreg@boe.ca.gov

The following offices offer limited services. For taxpayer advisory assistance, please call 1-916-227-6600 or 1-800-400-7115 (TTY:711)

Chicago

120 N. La Salle St., Ste. 1500
Chicago, IL 60602-2412

1-312-201-5300
FAX 1-312-782-7280

Houston

1155 Dairy Ashford, Ste. 550
Houston, TX 77079-3007

1-281-531-3450
FAX 1-281-531-3470

New York

485 Lexington Avenue, Ste 400
New York, NY 10017-5706

1-212-697-4680
FAX 1-212-697-5146

Some accounts in Arizona, Nevada, and Oregon located near the California border will be serviced by a California in-state district office.

Top Resources

Forms

  • BOE-38, Application for Out-of-State Voluntary Disclosure
  • BOE-230, General Resale Certificate

Related Websites

Other Helpful Resources

  • Sign Up for BOE Updates — Subscribe to our email lists and receive the latest news, newsletters, tax and fee updates, public meeting agendas, and other announcements.
  • Videos and How-To Guides — These resources will help you avoid common mistakes, file your tax returns online, and more.
  • Use Tax – What You Should Know — Helpful information and videos about use tax.
  • City and County Tax Rates — A listing of current and historical tax rates.
  • Special Notices — BOE special notices are issued whenever there is a change in law, tax rates, or BOE procedures.
  • BOE Online Services — Learn about the online services BOE offers.
  • Verify a Permit or License — You can use this application to verify a seller's permit, Cigarette and Tobacco product retailer license, eWaste account, or Underground Storage Tank Maintenance Fee Account.
  • BOE Field Offices — A comprehensive listing of all BOE field offices and contact information.
  • Find Your Board Member — You can use this application to quickly identify your elected BOE representative.
  • Get It In Writing! — The Sales and Use Tax Law can be complex, and you are encouraged to put your tax questions in writing.
  • Contact Us — A listing of BOE contacts for your questions and concerns.
  • Customer Service Center — You can also call our Customer Service Center at 1- 800-400-7115 8 a.m. to 5 p.m. Monday through Friday except state holidays to get answers to many of your questions.