Many smart shoppers can find bargains online, but don't realize they can incur a tax bill in the process. California law requires tax on in-state purchases, and also requires tax on items purchased out-of-state for use in California. Recent legislation now requires a “qualified purchaser” under Revenue and Taxation Code section 6225 to be registered with BOE to report and pay use tax owed. Under this new legislation, a "qualified purchaser" means 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. Note: Gross receipts are the total of all receipts from both in-state and out-of-state business operations 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 is not a holder of 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 Sales Tax vs. Use Tax: What’s the Difference? Tax collected by the retailer here in California is called sales tax, and the retailer is responsible for reporting and paying the tax to the state. When an out-of-state or online retailer doesn't collect the tax for an item delivered to California, the purchaser may owe "use tax," which is simply a tax on the use, storage, or consumption of personal property in California. Exempt Items Items that are exempt from sales tax are exempt from use tax as well. Use tax liabilities are often created by internet or mail order purchases with out-of-state retailers not required to collect the tax. Be sure to review your receipts for internet and other out-of-state purchases to determine if tax was charged. How to Report Use Tax If you have a California seller's permit, you must pay the use tax due on business related purchases with your sales and use tax return in the period when you first used, stored, or consumed the item in California. Report the amount of your purchase under "Purchases subject to use tax," (line 2) on the return. If you are a “qualified purchaser,” you must pay your use tax due by efiling your return for the previous calendar year by April 15. For the year ending 2008 and prior years, the use tax due date is January 31 of the following year. If you are not required to have a seller’s permit or a use tax account and you have not already paid all use tax due to the Board of Equalization, you may report use tax in the following ways. The easiest way to report and pay the use tax is on your Californa state income tax return. Follow the instructions included with your income tax return. Complete the worksheet included in those instructions to determine the amount of your use tax liability. Download a copy of Publication 79-B, California Use Tax, or request that a copy be mailed to you by calling our Information Center. Simply complete the use tax return included in the publication and mail it along with your payment to the Board of Equalization address shown on the return. It is not necessary to complete this tax return to report zero use tax.