California use tax generally applies when your business buys merchandise from an out-of-state seller that doesn't collect California tax and uses it here, or uses items it bought for resale. Seller's permit holders report use tax on their sales and use tax return. In an audit, CDTFA checks whether use tax was reported on untaxed equipment and supplies.
Sources: CDTFA Publication 110, California Use Tax Basics · Publication 73 · Publication 76, Audits
We help California businesses find use tax they may owe on past purchases, report it correctly going forward and handle use tax issues in a CDTFA audit. Co-Founder Shawn Zali spent more than seven years at the CDTFA as an auditor, so he knows where auditors look for unreported use tax.
Two quick questions. Our team will call you within one business day.
Tell us how you buy equipment, supplies and inventory, whether you hold a seller's permit, and whether CDTFA has contacted you. We explain the next steps.
We go through purchase invoices and your fixed asset list to find items bought without California tax, and items bought for resale that were put to use.
Depending on your situation, we report use tax on your returns, help you register, prepare a voluntary disclosure request if you may qualify, or support your position in an audit.
| Your situation | How use tax is reported |
|---|---|
| You hold a seller's permit | On your sales and use tax return, with your business purchases |
| No seller's permit, but more than $10,000 a year in purchases subject to use tax (2024 through 2028, excluding vehicles, vessels and aircraft) | Register with CDTFA as a "qualified purchaser" and report annually |
| Other purchasers | A CDTFA consumer use tax account or, in some cases, the California income tax return |
| Vehicle or vessel bought from a non-dealer | Generally paid to DMV at registration |
Sources: Pub 73 · Pub 123, Identifying and Reporting Use Tax
CDTFA's audit guide lists use tax as a core audit question: did you report the cost of business equipment and supplies you bought without tax, from out-of-state vendors or for resale, that's subject to use tax?
If you're already in an audit, see our CDTFA sales tax audit help page.
Source: Pub 76, Audits · Pub 110
CDTFA runs two voluntary disclosure programs for use tax. Both limit the look-back to three years instead of the usual eight, allow CDTFA to waive late filing and late payment penalties, and let you describe your situation anonymously first to get a written opinion.
For California purchasers who owe use tax on out-of-state purchases. Conditions include: not previously registered with CDTFA or reporting use tax, not engaged in business as a retailer, not already contacted by CDTFA about the tax, reasonable cause for not paying, and the purchase isn't a vehicle, vessel or aircraft.
For out-of-state businesses engaged in business in California that should have collected use tax on sales to California customers.
The programs don't apply to anyone who holds or has held a seller's permit. Permit holders generally correct unreported use tax on their returns. We can help you decide which path fits.
Sources: Pub 178, Voluntary Disclosure Program (October 2026) · In-State Voluntary Disclosure Program · Out-of-State Voluntary Disclosure
Tax Resolution Plus is a private firm. We work for you and deal with CDTFA as your authorized representative, not as part of the agency.
Use tax applies to the use, storage or other consumption in California of the same kinds of items sales tax applies to. It generally applies when you buy from an out-of-state seller that doesn't collect California tax, or when you use items bought for resale. The rates are the same as sales tax.
It may. If an out-of-state or online seller didn't collect California tax and you use the item in California for something other than resale, the purchase is generally subject to use tax. If the seller collected California use tax, keep the receipt; you don't report it again.
If you hold a seller's permit, you report use tax on your business purchases on your sales and use tax return. Without a permit, a business with more than $10,000 a year in purchases subject to use tax may need to register as a qualified purchaser and report annually.
Yes. CDTFA's audit guide says the auditor checks whether you reported use tax on business equipment and supplies you bought without tax from out-of-state vendors or for resale. An audit usually covers three years, or up to eight years for periods with no return filed.
You may qualify for one of CDTFA's voluntary disclosure programs. They can limit the look-back to three years instead of eight, and CDTFA may waive late penalties. They don't apply if you hold or held a seller's permit, and the In-State program isn't available once CDTFA has contacted you about the tax.
Tell us how your business buys equipment and supplies. We'll explain where use tax may apply, whether voluntary disclosure may fit and what to do next.
Free 30-minute consultation. No obligation.
Reviewed by Shawn Zali, Co-Founder, former CDTFA auditor (7+ years) · Last updated: October 27, 2026
Tax Resolution Plus Inc. is a private tax resolution firm. We are not affiliated with the CDTFA, the IRS or any government agency. This page is general information, not tax advice for your situation. Results vary based on each taxpayer's circumstances.