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California Use Tax for Businesses

California use tax applies when a business purchases taxable goods for use in California but sales tax was not collected at the time of purchase.

Use tax may apply when:

Use tax liability may arise even if your business does not sell taxable products.

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What Is California Use Tax

Use tax complements sales tax. When sales tax is not collected by the seller, the purchaser may owe use tax directly to California.

Use tax typically applies to:

How Use Tax Exposure Arises

Businesses may create use tax exposure when:

During audit, the CDTFA often reviews purchase records to identify unpaid use tax.

California Sales Tax Audit Risk

Use Tax and Nexus

Even if your business does not sell taxable goods, nexus may require registration and reporting of use tax.

If nexus exists due to:

Use tax reporting obligations may also apply.

California Economic Nexus Threshold | Remote Employees and Nexus California

What Happens If Use Tax Was Never Reported

Failure to report use tax may result in:

Use tax is frequently discovered during audit of other tax types.

California Back Sales Tax Liability | California Voluntary Disclosure Agreement

Common Use Tax Mistakes

Accumulated unpaid use tax may significantly increase audit exposure.

California Use Tax FAQ

Sales tax is collected by the seller. Use tax is owed by the purchaser when sales tax was not collected.

Yes. Businesses may owe use tax on taxable purchases where sales tax was not paid.

Yes. Use tax exposure is commonly identified during sales tax audits.

Unsure Whether You Owe California Use Tax

If your business has made out of state purchases or online equipment acquisitions, evaluate exposure before audit review.

Run Your Nexus Risk Check

Identify potential California use tax exposure before penalties escalate.

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