Farm and Construction Equipment Purchased Outside California May Be Taxable

NR# 41-G
Date: August 8, 2000
Customer and Taxpayer Services Division

Farm and Construction Equipment Purchased Outside California May Be Taxable

The Board of Equalization would like to remind California's farmers and construction contractors they may be liable for use tax on purchases of merchandise from out-of-state retailers. If you have purchased items such as farm equipment, heavy construction equipment, clothing, tools, supplies and other merchandise from an out-of-state retailer who did not charge you tax at the time of sale, and the sales tax would have been charged had the purchase been made in California, then generally you will owe the use tax on these purchases.

One reason the use tax was established in 1935 was to protect California businesses from out-of-state competitors who can sell the same goods without tax if they are not engaged in business in California. Revenues generated from the use tax are deposited in the State's general fund and are used to support public services throughout California. The use tax rate is the same as the sales tax rate and ranges from 7.25 percent to 8.50 percent, depending on the county where the property is used.

The Board of Equalization recently became aware that a significant amount of farm and construction equipment is being purchased from retailers located outside California who do not charge or collect the use tax because they are not engaged in business in this state. Currently, the Board of Equalization is gathering information on these non-taxed purchases of equipment and will soon begin contacting both farmers and contractors regarding these purchases. Those persons who have not reported buying such equipment will be billed for the amount of the use tax due on the unreported purchase price of the equipment, plus interest and in some cases a penalty. Therefore, if you have made any purchases of equipment from out-of-state retailers without paying tax and would like to pay the tax now, we urge you to report these purchases as explained below.

If you are currently registered with the Board, you may report non-taxed purchases on your return. If you have a Seller's Permit, you may report the purchase on line two (2) of your sales and use tax return, titled "Purchases Subject to Use Tax." If you have a Consumer Use Tax account, you may report the purchase on line one (1) of your consumer use tax return. Alternatively, if you do not have a permit, you may use either the Individual Use Tax Return found in the Board's publication 79-B, California Individual Use Tax, or you may submit a letter to the Board describing the item purchased, the purchase price and a check or money order for the amount of tax due.

If you are unsure of the proper tax rate in your area or need more information to determine if your purchase of equipment is subject to the tax, please call (916) 445-5167 for further assistance. Based on the information you provide, a representative will determine if a tax liability exists and send you the proper form for reporting the purchase. In addition, the representative can explain how you can request to be relieved of any penalty that may otherwise apply.

You can also obtain information on the California Consumer Use Tax via the Board of Equalization's Internet website at or by calling our Information Center at (800) 400-7115. A copy of publication 79-B may be requested by calling the Information Center or you can download it from our website.