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September 18, 2012 > Internet shopping was never tax-free

Internet shopping was never tax-free

Consumers owe use tax on purchases made online or by mail

Submitted By Jaime Garza

Items purchased before this weekend from online or mail order retailers are not tax-free, the Board of Equalization (BOE) announced today. California has required payment of use tax since 1935, and since then consumers have owed use tax on untaxed purchases made from out-of-state retailers.

Though the use tax is 77 years old, many Californians are unaware of it. Use tax is the equivalent of sales tax and applies to purchases from retailers who are not required to report and pay sales tax in California. Californians who purchase items from out-of-state retailers that do not collect California tax are required to pay the use tax directly to the state.

A new state law which took effect on Saturday, September 15, 2012, simply requires additional out-of-state retailers to collect the tax when they make the sale, rather than requiring taxpayers to report the tax on their own.

If consumers do not see a line item for the sales tax charged on their bills when making these purchases, they are responsible for paying the use tax on their own, based on the tax rate for the area in which they live. The BOE makes it simple for Californians to pay their use tax, through eReg, or as a line item when they pay their state income taxes.

In December 2010, the BOE estimated that $1.145 billion dollars in use tax was going uncollected. The new law will not fill this entire gap but is expected to generate millions of dollars in revenues for the state each year. Like the state sales tax, use taxes are used to fund state and local services.

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