Real estate brokers and salespersons who earn more than $100,000 in gross receipts from business operations per calendar year may now be required to register as a “qualified purchaser,” report and pay use tax directly to the California Board of Equalization by April 15 for the previous calendar year. This new requirement was promulgated by AB x4-18(2009). There is no fee for registration, but qualified purchasers will now have to pay the state’s use tax for out-of-state purchases directly with the BOE starting with the 2010 tax year.

REALTORS® began receiving notices and registration applications in the mail this week from the State. Completing the registration and making the use tax payment to the BOE for 2010 purchases prior to April 15 will prevent fees and penalties from being assessed. 

The use tax applies to most purchases from sellers who are not required to collect sales tax. That is often the case with Californians’ purchases from out-of-state or online retailers. The use tax was created as a companion to the sales tax in 1935 in order to protect California businesses that must regularly collect sales tax and would otherwise be at a competitive disadvantage to out-of-state vendors.

Use tax is administered by the Board of Equalization, but legislation enacted in 2003 provided individuals the option to report use tax on their state income tax return instead of filing a use tax return with the BOE. In general, consumers must pay California use tax if they purchase an item from an out-of-state seller and the seller does not collect California sales or use tax, and the consumer uses, gives away, stores, or consumes the item in this state.

While sales tax is owed to the BOE by the seller, the purchaser is generally responsible for paying the use tax. The use tax rate is the same as one’s local sales tax rate.

For more information on other taxes and fees in California, visit www.taxes.ca.gov

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