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Your Client May Owe on Out-of-state Purchases

In general, your clients must pay California use tax on purchases made on the internet, by telephone, by mail or in person if both of the following occur:
• The vendor does not collect California sales or use tax; and
• Your client uses, gives away, stores or otherwise consumes the item in this state.

Generally, use tax is due on purchases from out-of-state or foreign vendors if the purchase of the same item in California would be subject to sales tax. However, not all items are subject to tax (see BOE Publication 112, Purchases from Out-of-State Vendors). If the out-of-state vendor charges California tax, you should advise your clients to keep the receipt showing the tax for their records.

This entry was posted on Monday, January 19th, 2009 at 3:54 pm and is filed under CalCPA Buzz. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

glenn Kawaguchi

I have two sales tax audits in progress right now on this issue. They are going back through all purchases for the past three years to determine what purchases were made out of state and how much sales tax if any has been paid. The $ amounts involved are very minimal, however the time involved is quite alot as I am sure you can imagine.
Sonja McCart

I appreciate the responses, thank you.
Sonja
melbeap

As a CPA your responsibility is to advise as to what is taxable and help the client to comply.

The law is the law and your decision is not based on what other CPA's may be doing, unless they have a legal reason not to answer the question.

The profession has enough problems already in trying to approve unethical standards.
Rick Hale, CPA, Tustin

I have personally included a tax on my own 540 in order to try and comply with the law. You never know when you may have to go in front of congress for a cabinet set.

I have also suggested it to my client for about 4 -5 years.
Mike Parmelee

In reply to Sonja McCart, this is absolutely enforceable. It is part of state law and the state is getting more vigilant about collecting it. We certainly advise our clients. We have done so by written letter to them explaining the issue and we also have a question in the annual organizer asking them for the information to calculate it. We have done so since they place the "box" on the tax form.
Sonja McCart

I would be interested to know how enforceable this is, or how many CPA's actually advice their clients to keep track of their purchases and pay this tax.

Sonja McCart, CPA in Redlands.