Qualified Purchaser Program

Qualifications

A "Qualified Purchaser", as defined in section 6225 of the Revenue and Taxation Code, is a person that meets all of the following conditions:

  • The person receives at least $100,000 in gross receipts from business operations per calendar year.
  • The person is not required to hold a seller's permit or certificate of registration for use tax (under section 6226 of the Revenue and Taxation Code).
  • The person does not hold a use tax direct payment permit as described in section 7051.3 of the Revenue and Taxation Code.
  • The person is not otherwise registered with the BOE to report use tax.

A "person" is defined in section 6005 of the Revenue and Taxation Code.

Not Engaged in Business in California. If you are not engaged in business in California and have no business location or business presence in California, but you use a California address for your income tax return (such as a CPA or tax preparer), you are not required to register.

Gross Receipts from Business Operations

Gross receipts from business operations include the total of all amounts received from goods and services from both in-state and out-of-state business operations before subtracting any costs or expenses. The following are common federal income tax forms that are used to determine gross receipts:

  • Form 1040 – Individual Income Tax Return
  • Form 1065 – Partnership Income Tax Return
  • Form 1120 – Corporate Income Tax Return
  • Form 1120s – S Corp Income Tax Return
  • Schedule C – Profit or Loss From Business
  • Schedule E – Supplemental Income or Loss
  • Schedule F – Profit or Loss From Farming
  • Form 4835 – Farm Rental Income & Expenses
  • Form 1099DIV – Dividends & Distributions
  • Form 1099MISC – Miscellaneous Income

Multiple Businesses. Gross receipts from all businesses with the same ownership in a calendar year are used to calculate the $100,000 minimum requirement as defined in section 6225 of the Revenue and Taxation Code. For example:

  • For federal income tax purposes, you report $75,000 in gross receipts from your legal services business, and you report $60,000 in gross receipts from your marketing business. For purposes of California Revenue and Taxation Code section 6225, you are considered to receive at least $100,000 in gross receipts.
  • For federal income tax purposes, you report $50,000 in gross receipts on Schedule C (Profit or Loss From Business), $40,000 in gross receipts on Schedule E (Supplemental Income or Loss which is used to report rental income, royalties, and other types of income), and $40,000 in gross receipts on Schedule F (Profit or Loss From Farming). For purposes of California Revenue and Taxation Code section 6225, you are considered to receive at least $100,000 in gross receipts.
  • For federal income tax purposes, you report $80,000 in gross receipts from real estate rentals in Nevada, and $80,000 in gross receipts from real estate rentals in California. For purposes of California Revenue and Taxation Code section 6225, you are considered to receive at least $100,000 in gross receipts.

Exempt for Income Tax Purposes. If your business is considered exempt for income tax purposes, you will be considered a Qualified Purchaser if your gross receipts are at least $100,000. While your status is exempt for income tax purposes, you are not exempt for sales and use tax purposes.

1099 Income. If you report 1099 income as business income on Schedule C, it will be used to determine gross receipts from business operations. If you are a statutory employee, your 1099 income generally qualifies as gross receipts for business operations.

Gross Receipts Yearly Threshold
If your yearly gross receipts are at least $100,000, you are considered a Qualified Purchaser. However, if your gross receipts drop below the $100,000 threshold for the last two consecutive years, you are allowed to close your qualified purchaser use tax account. However, you are still required to report and pay use tax on future purchases made without tax from out-of-state retailers. Please note that this closeout process is not automatic; therefore, you may close your account by contacting your local BOE field office and providing sufficient documentation indicating your gross receipts from business operations fell below $100,000 for the last two consecutive years. If your gross receipts from business operations are below $100,000, but you have use tax to report, please use BOE-401-DS, Use Tax Return, or your Franchise Tax Board Returns to report the use tax due.

Automatic Close-out
The BOE will automatically close your qualified purchaser use tax account after you have filed returns for three consecutive years and have not reported any purchases subject to use tax. If your account has been closed, you will receive a notice of closeout. However, if you meet the $100,000 threshold requirements of Revenue and Taxation Code 6225 in the future and make purchases subject to use tax, you must re-register with the BOE.

Insurance Company. Insurance companies that pay the gross premium tax with returns filed with the Department of Insurance do not have to register as a Qualified Purchaser.