Use tax is a sales tax you owe on items you buy outside California but use inside it

California's use tax is a tax on goods you purchase from out-of-state sellers and bring into California to use. It exists because California has a sales tax, and the state wants to prevent people from dodging that tax by shopping elsewhere. If you buy something in Nevada or online from a seller with no California presence, you owe use tax on that purchase at the same rate as California's sales tax would have been.

The tax applies whether you buy in person during a trip, order by mail, or purchase online. It covers physical goods — furniture, electronics, clothing, tools — not services. The rate depends on where in California you live, because California's use tax rate matches your local sales tax rate, which includes state tax plus any county or city add-ons.

Most people do not pay use tax because most online sellers now collect sales tax automatically. But if a seller does not collect it, you are responsible for reporting and paying the tax yourself to the California Department of Tax and Fee Administration (CDTFA).

Key Takeaways

  • Use tax applies to items you buy outside California and use inside it, at the same rate as California sales tax for your location.
  • You owe use tax only if the seller did not collect sales tax at the time of purchase.
  • Most online purchases now have sales tax collected automatically, so use tax applies mainly to in-person out-of-state purchases and a small number of online sellers.
  • You report use tax on your California income tax return or directly to the CDTFA if you do not file an income tax return.
  • Use tax is self-reported; the state does not send you a bill unless it audits your records.

When you actually owe use tax

You owe use tax only when three things are true: you bought something outside California, the seller did not collect California sales tax, and you brought the item into California to use it. If the seller collected sales tax at the time of purchase, you do not owe use tax — the tax was already paid.

The most common real-world scenario is buying something in person while traveling. If you buy a laptop in Oregon (which has no sales tax) and bring it home to California, you owe use tax on that laptop. If you buy the same laptop online from a retailer that does not have a physical location in California and does not collect California sales tax, you owe use tax. But if you buy it from Amazon, Best Buy, or most major online retailers, they already collected California sales tax, so you owe nothing more.

Items you buy for use outside California do not trigger use tax. If you purchase something in Nevada to use in Nevada, no California use tax applies, even if you live in California.

How use tax rates work across California

California's use tax rate is not a single number. The state base rate is 7.25 percent, but your actual rate depends on your location. Counties and cities add their own taxes on top of the state rate. A purchase subject to use tax in Los Angeles County might be taxed at 9.5 percent, while the same purchase in a different county could be 8.625 percent.

The rate that applies is the rate where you use the item, not where you bought it. If you live in San Francisco and buy something in Fresno, you owe San Francisco's use tax rate. This matters because you need to know your local rate when you report use tax on your return.

You can find your exact rate on the CDTFA website by entering your zip code. The site shows the combined state, county, and local rate for your area.

How to report use tax on your California return

Most California residents report use tax on their state income tax return using Form 540. The return includes a line where you can enter use tax owed. You calculate it by multiplying the purchase price by your local use tax rate, then entering the total.

If you do not file an income tax return because your income is below the filing threshold, you can report use tax directly to the CDTFA using Form 600, the Use Tax Return. You mail the form with payment to the CDTFA address listed on the form.

Keep receipts for any out-of-state purchases you make. If the CDTFA audits your return, you will need proof of what you bought and where. The state does not typically audit individual use tax unless the amount is large or appears inconsistent with your income.

Why most people do not pay use tax

The reason use tax feels invisible is that most sellers now collect it. After the 2018 Supreme Court decision in South Dakota v. Wayfair, states could require online sellers to collect sales tax even if they had no physical location in that state. Major retailers — Amazon, Walmart, Target, eBay — now collect California sales tax on nearly all purchases. When tax is collected at checkout, use tax does not explore.

Use tax mainly affects small online sellers, international purchases, and in-person shopping during travel. A person who buys almost everything from major retailers and does not travel much may never owe use tax in their lifetime.

The state does not send bills or reminders for use tax. It is self-reported, which means you are responsible for calculating and paying it. The CDTFA does not track your purchases or contact you unless it has reason to believe you owe a significant amount.

What happens if you do not report use tax

If you owe use tax and do not report it, the consequences depend on whether the CDTFA discovers the unpaid tax. For small amounts on occasional purchases, discovery is unlikely. For larger or repeated purchases, especially if you are audited for other reasons, the state may assess back use tax plus penalties and interest.

Penalties for unpaid use tax can be 10 percent of the tax owed if the failure was not willful, or up to 25 percent if the CDTFA determines it was intentional. Interest accrues from the date the tax was due. If you owe a substantial amount, the state can place a lien on your property or garnish your wages.

If you realize you owe use tax from prior years, you can file an amended return. The CDTFA is more likely to work with you on a voluntary correction than if it discovers the debt during an audit.

Use tax versus sales tax: the practical difference

Sales tax and use tax are meant to be the same tax, collected at different points. Sales tax is collected by the seller at the time of sale. Use tax is collected from the buyer after the sale if the seller did not collect it. The rate is identical — your local combined rate.

From a practical standpoint, sales tax is automatic and painless. You see it at checkout and pay it without thinking. Use tax requires you to track purchases, calculate the tax yourself, and report it on your return. That friction is why use tax is underreported and underenforced.

California treats the two as interchangeable for tax purposes. Paying sales tax in another state does not reduce what you owe in California use tax. If you bought something in Nevada and paid Nevada tax (if it applied), you still owe California use tax on the same purchase.

Frequently Asked Questions

Do I owe use tax on items I buy online from Amazon or other major retailers?

No. Amazon, Walmart, Target, and most major online retailers collect California sales tax automatically at checkout. Once sales tax is collected, use tax does not explore. You only owe use tax if the seller did not collect California sales tax.

What if I buy something out of state and have it shipped to California?

You owe use tax if the seller did not collect California sales tax. The location where the item is shipped does not matter — what matters is whether the seller collected tax. If you buy from a small out-of-state retailer that does not collect California tax and have it shipped to your California address, you owe use tax on that purchase.

Is use tax the same as sales tax?

They are meant to be the same rate, but they are collected differently. Sales tax is collected by the seller at purchase. Use tax is self-reported by the buyer after purchase if the seller did not collect it. Both are based on your local combined tax rate.

Do I need to report every small purchase I make out of state?

Technically, yes — use tax applies to any taxable purchase made outside California without sales tax collected. Practically, the CDTFA does not audit individual returns for small amounts. You are responsible for reporting, but enforcement focuses on larger amounts or patterns of unreported tax.

What if I bought something years ago and did not pay use tax?

You can file an amended return for prior years. The CDTFA generally accepts voluntary corrections more readily than it pursues unpaid tax discovered during an audit. If you owe a significant amount, contact the CDTFA to discuss your options.