California Income Tax Return Instruction Booklets

NR# 57-C
Date: December 13, 2002
Customer & Taxpayer Services Division

California Income Tax Return Instruction Booklets
To Include a Use Tax Return for Reporting
Out-of-State Purchases

It's that time of year again when the Franchise Tax Board will be mailing California residents their 540/540A and 540 2EZ Personal Income Tax Booklets. John Chiang, Chair, State Board of Equalization, announced today that individuals will notice a new Use Tax Return insert within their 2002 Personal Income Tax Instruction Booklets that asks the question: Do You Owe Use Tax?

The California Use Tax Law, which became effective July 1, 1935, was designed to eliminate the competitive advantage of out-of-state retailers not required to pay sales tax. While the use tax has been around for 67 years, this will be the first appearance of the California Individual Use Tax Return within the 540/540A and 540 2EZ Personal Income Tax Instruction Booklets.

Many Californians purchase items from out-of-state businesses that do not charge California tax on those sales. As a result, consumers owe California use tax on those items purchased for consumption, use, or storage. The return is provided as a reminder and a convenience for individuals to self-report and pay their use tax obligations to the State of California on those items subject to tax.

Generally, if sales tax would apply to a purchase of a particular item in California, use tax applies to the purchase of that item from a business located outside California. For example, if a dining table were purchased at a California store, sales tax applies to the transaction. However, if the same dining table were purchased from a retailer located outside of California and delivered to California, use tax would apply.

Some out-of-state businesses collect California use tax and pay it to the state for the convenience of their customers. However, if the seller does not charge use tax on the transaction, the purchaser is responsible for reporting and paying the use tax to the state.

If you have any questions regarding the California Individual Use Tax Return insert, please contact the State Board of Equalization's Information Center at 1-800-400-7115, Monday through Friday, 8:00 a.m. to 5:00 p.m. Pacific Standard Time.