FAQ - Use Tax on Purchases of Vehicles, Vessels, Aircraft
- What is the difference between sales tax and use tax?
- How does the Board of Equalization (BOE) receive information about my purchase?
- Are transfer by barter, exchange, and trade-in subject to tax?
- What tax rate applies?
- When is the use tax due?
- How do I report and pay use tax on a documented vessel or an aircraft?
- How do I report and pay use tax on a vehicle or undocumented vessel?
- Are there penalties and interest due if my payment is late?
- Is there a provision for reduction or elimination of penalties and interest?
- Can I dispute or appeal a BOE determination of tax due?
- How do I request a refund?
- What if I paid tax to a broker? Who is responsible?
- Where can I get more information?
- Related Use Tax Resources
What is the difference between sales tax and use
In California, transfers of tangible personal property for a consideration (sales and purchases) are subject to sales tax or use tax unless the law provides an exception (that is, an exemption or exclusion). Although the rates are generally the same, sales tax is imposed on the retailer for the privilege of selling tangible personal property in this state. The retailer may collect reimbursement from their customer if the contract of sale so provides. Although this is usually invoiced as "sales tax," it is actually sales tax reimbursement. Whether or not the retailer collects reimbursement, the retailer is liable for the tax due.
Use tax is generally imposed on the purchaser of tangible personal property that is used, consumed, or stored in this state. Sales of vehicles, vessels, and aircraft by licensed dealers are usually subject to sales tax, for which sales tax reimbursement is collected at the time of purchase. Use tax applies to the cost of vehicles, vessels, and aircraft purchased from non-dealers (for example, private parties) or from outside California for use in this state. Use tax also applies to most leases of tangible personal property. Private party sales or brokered transactions are normally subject to use tax. If the first use of the property occurs in California, use tax may apply even if the purchaser is not a resident of the state. The sales and use tax are "mutually exclusive," which means that either sales tax or use tax applies to a single transaction, but not both.
How does the Board of Equalization (BOE) receive information about my
The Consumer Use Tax Section receives information from various sources. These sources include the Department of Motor Vehicles (DMV) on vehicles, motor homes, and undocumented (CF) vessels and from the Federal Aviation Administration (FAA) on aircraft. Records obtained from the United States Coast Guard (USCG) identify transfers of ownership of documented vessels. California County Assessor's Offices and other states also provide information identifying ownership of vehicles, mobile homes, vessels, and aircraft.
Are transfer by barter, exchange, and trade-in
subject to tax?
Yes, the total value or consideration given to acquire tangible personal property is included in the amount subject to tax. In general, consideration includes cash, assumption of any loan, cancellation of a debt, value of property traded or exchanged, value of services bartered, and any other payment, valued in dollars, given to purchase the property.
For example, if you purchased a 45-foot sail boat with a selling price of $200,000 and you gave the seller $25,000 cash, assumed his $100,000 mortgage, and also traded your 36-foot motor home worth $75,000, you would owe tax on the entire $200,000 purchase price (that is, the total value or consideration given to acquire the boat). No deduction can be taken for tax previously paid when you bought the motor home.
What tax rate applies?
The tax rate is generally the same for sales tax and use tax. The use tax rate is based on where the property will be used, stored, or registered. In the case of a documented vessel, it is the marina or principal mooring location. For an aircraft, it is the hangar or tie-down spot. For property registered with DMV, the tax rate is based on the address provided to the DMV by the registered owner. See California Sales and Use Tax Rates for a listing of current tax rates by city or county.
When is the use tax due? (Regulation 1610)
For purchases of vehicles, undocumented vessels, and mobile homes, the use tax is due on or before the last day of the month following the month of purchase. Use tax on aircraft and documented vessels is due the last day of the twelfth month following the month of purchase or the last day of the month following the month we mail you a return, whichever period expires first. For example, if you purchased an aircraft on April 1, 1998, the use tax would be due April 30, 1999. However, if the BOE mailed you a return dated June 15, 1998, the use tax would be due July 31, 1998. In this case, the return's due date supersedes the 12-month rule because it occurs earlier. (Regulation 1610, Vehicles, Vessels, and Aircraft.
How do I report and pay use tax on a documented
vessel or an aircraft?
You can report and pay use tax on a documented vessel or aircraft using electronic registration (eReg). Please have the following information available at the time of registration:
- Name and address of both purchaser and seller,
- Identification number of the property purchased, such as the tail number, documentation number, or serial number,
- Make, model, year of property,
- Date of purchase,
- Total purchase price, and
- Location where property will be used, stored, or registered.
How do I report and pay use tax on a vehicle or
When you register a vehicle or undocumented vessel with the Department of Motor Vehicles (DMV), you report and pay the use tax to DMV who is acting as our agent in collecting the tax. (An undocumented vessel is a vessel that is not required to have a marine certificate issued by the U.S. Coast Guard.) The registration constitutes filing a return with the BOE. You do not need to file a separate use tax return with the BOE for purchases of vehicles or undocumented vessels if you complete registration with the DMV. However, if you had purchased a vehicle or undocumented vessel and later sold it without completing registration with DMV, then use tax is due directly to us. Contact our Consumer Use Tax Section for details on how to report the use tax.
Are there penalties and interest due if my payment
Generally yes. Penalties and interest are calculated on the unpaid tax portion. Please see publication 75.
Is there a provision for reduction or elimination
of penalties and interest?
Yes, under certain circumstances. Please see publication 75.
Can I dispute or appeal a BOE determination of
Any person against whom a determination (billing) is made or any person directly interested may petition for redetermination of a billed liability. You have 30 days from the date of the Notice of Determination (bill) to submit a Petition for Redetermination. It must be in writing and specify the grounds on which you base your claim. If you have additional documentation to verify your exemption from tax, you may submit it along with your petition. (Revenue and Taxation Code section 6561)
Our Petition Section will acknowledge receipt of your request and inform you of the additional documentation required to qualify for exemption/exclusion. If your petition is approved or adjusted, you will receive a statement showing the revised or canceled billing. If your petition is denied, you will be notified that the tax remains due.
If a Petition for Redetermination is not filed within the 30-day petition period, the determination becomes "final" and is forwarded to our Centralized Collection Section for action. To avoid interest charges, you may choose to pay the tax portion of your liability while in the petition process. See publication 17, Appeals Procedures, publication 76, Audits, and form BOE-416, Petition for Redetermination.
How do I request a refund?
If we find that tax, penalty, and/or interest has been paid more than once or was unnecessarily collected, the person who paid the tax to the BOE is entitled to a credit or refund. If the overpayment is caused by an error on a return, a refund claim must be filed within three years from the date the return was due. In the case of a determination, the refund claim must be filed within six months from the date the determination became final or within six months from the date of overpayment, whichever period expires later.
If an overpayment of tax was made to a dealer or broker on a retail sale subject to sales tax, you must request the refund directly from the retailer. The retailer, being the person who is liable for the tax, would apply for a credit or refund on their quarterly sales tax return and submit verification of its refund to you, the purchaser.
If you paid the tax to us or the DMV, you would make a request for a refund in writing to the BOE. Your request should detail the facts explaining why you feel the tax was overpaid or collected in error and include copies of receipts, returns, canceled checks, and any other documentation that verifies your claim. For more information and a copy of form BOE-101, Claim for Refund or Credit, please see publication 117, Filing a Claim for Refund. Also see Revenue and Taxation Code sections 6901, 6902.
What if I paid tax to a broker? Who is
Normally, when a broker acts as an agent without authority to bind the parties or transfer title, the broker is not considered a retailer and is not obligated to collect sales or use tax. However, effective January 1, 1996, the Sales and Use Tax Law was amended to provide that a purchaser who can provide receipts verifying that the sales or use tax was paid to a broker is relieved of the liability up to the amount of tax paid. The broker becomes liable for the tax, up to the amount collected, as a retailer. Any additional tax determined to be due is the obligation of the purchaser. Tax on transactions which occurred prior to January 1, 1996, remain the obligation of the purchaser, even if the broker collected use tax on the transaction. See Revenue and Taxation Code sections 6202 and 6283.
Where can I get more information?
To contact the Consumer Use Tax Section and speak with a representative, you may call 916-445-9524 between the hours of 8 a.m. and 5 p.m., Monday through Friday excluding State holidays. Our fax number is 916-324-2491. Address written correspondence to:Consumer Use Tax Section MIC 37
State Board of Equalization
P.O. Box 942879
Sacramento, CA 94279-0037
Please have your account number available when calling and include the account number and daytime phone number on any written or faxed correspondence.
- Related Use Tax Resources