Daycare Tax Tips

An easy way to pay California use tax?

New "lookup table" a good option for many state taxpayers

Our topic today is California use tax. It's a never ending saga here in the Golden State, but I think the state Board of Equalization may be onto something helpful for state taxpayers.

For 2011 the BOE has come up with an Estimated Use Tax Table. Individual taxpayers may use the "lookup table" to determine how much use tax to pay, based on their income level. Folks with income less than $20,000 pay $7. Folks with income between $150,000 and $199,999 pay $123. Above that, you pay 0.07% of your California Adjusted Gross Income.

California requires payment of use tax if you purchase goods out-of-state that are used, consumed, or stored in California, when no sales tax is collected on the purchase. Most such purchases are made over the Internet or by mail order from out-of-state sellers.

Especially with the current budget problems, the state is determined to get California residents to comply and pay any use tax they owe. I think authorities (correctly) believe that the majority of state residents are making at least some purchases online where California sales tax is not collected.

Some folks don't shop online at all and that is fine. But for the rest of us, the beauty of this table is that you don't have to keep track of purchases or scrutinize receipts. Hardly anyone was doing that and I think the state realized they had to make it easier. Besides being easier, if you pay use tax based on the table amount, you are safer. Even if you might have had to pay more use tax based on your actual purchase history, you can safely pay the table amount and leave it at that. State auditors will not hassle you about it.

There are a few caveats, however:

(1) The table amount only applies to purchases under $1,000. Any purchases of single items costing $1,000 or more must be dealt with separately. Calculate the use tax on high dollar items (based on the sales tax rate in your county) and add that to the table amount.

(2) The table amount only applies to individual tax returns and personal use items. Thus, child care providers and other sole proprietors must still keep an eye on business purchasing. You can pay business use tax directly to the BOE or add it to the table amount reported on your California income tax return. Remember to deduct any business use tax you pay as a business expense on next year's income tax return.

(3) California businesses with gross income of $100,000 or more are consider Qualified Purchasers and must register with the Board of Equalization to pay any business use tax owed.

(4) You cannot use the lookup table if you have a California Seller's Permit. In that case, report use tax on your state sales tax return.

The use tax lookup table seems like a great option for most of my clients. I expect that leaving the use tax line blank year after year will eventually draw the attention of auditors.

Last updated on 3 December 2012

Posted on 2012-02-10 04:53:30