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Cyber Monday spree? You owe ‘use tax.’

Finding some awesome holiday gift deals on this Cyber Monday? They may not be quite as awesome as you think, Californians: You owe taxes on those purchases.

California law imposes tax not only on in-state purchases, but also on items bought out-of-state for use in California; this “use tax” has been law since 1935, to prevent out-of-state retailers from having a competitive advantage over California-based vendors who were required to report sales tax beginning in 1933. And the advent of online shopping hasn’t changed anything.

So if an out-of-state or online retailer doesn’t collect this tax for an item delivered to California, it’s the purchaser’s duty to pay it, based on the tax rate for the area in which they live.

There are two ways to pay any use tax you may owe: Register and pay on the state’s eReg website after each purchase; or pay it as a line item on your state income taxes, using the Board of Equalization’s and the Franchise Tax Board’s use-tax calculation based on your adjusted gross income.

The average California family owes about $61 in use tax each year, and the Board of Equalization estimates that California consumers and businesses failing to report and pay the use tax they owe costs the state more than $1.1 billion a year. Like sales tax, this money helps fund programs such as public education, public safety, and transportation.

Josh Richman

Josh Richman covers state and national politics for the Bay Area News Group. A New York City native, he earned a bachelor’s degree in journalism from the University of Missouri and reported for the Express-Times of Easton, Pa. for five years before coming to the Oakland Tribune and ANG Newspapers in 1997. He is a frequent guest on KQED Channel 9’s “This Week in Northern California;” a proud father; an Eagle Scout; a somewhat skilled player of low-stakes poker; a rather good cook; a firm believer in the use of semicolons; and an unabashed political junkie who will never, EVER seek elected office.

  • John W

    “…failing to report and pay the use tax they owe costs the state more than $1.1 billion.”

    So, I wonder how much people DO report and pay under this system, and how many taxpayers account for that total.

  • Elwood

    Lots of luck to the great state of Kaliforniay in trying to collect that.

    Paying taxes to Kaliforniay may be even more popular than paying taxes to the feds.

  • John W

    Californians are very supportive of taxes — if paid by somebody else. That was true of both Prop. 13 and Prop. 30.

  • Elwood

    Taxes paid by somebody else are always popular.

    Don’t tax me, don’t tax thee, tax the man behind the tree!

    — Sen. Russell Long

  • John W

    As somebody who has resided in 12 states and witnessed all manner of poor governance and self-governance, I can say with authority that California is in a league of its own regarding Sen. Long’s observation.