California use tax is what you owe when you buy taxable goods and no California sales tax gets collected at the register. The rate matches the combined sales tax rate at your location, which starts at a 7.25% statewide base and climbs as high as 11.25% in some cities once local district taxes are added. Most people run into it with online orders from out-of-state sellers, purchases made while traveling, and vehicles bought elsewhere and later registered in California.
How It Differs From Sales Tax
Sales tax and use tax cover the same transactions at the same rates. The difference is who reports and pays. When a California retailer rings up a sale, the store collects sales tax and sends it to the state. When no California tax gets collected, the obligation shifts to you, and it becomes use tax. Same rate, same taxable items, same exemptions.
Revenue and Taxation Code Section 6201 imposes use tax on the storage, use, or consumption of tangible personal property purchased from any retailer when sales tax wasn’t collected. “Tangible personal property” means physical items you can see or touch. It generally doesn’t cover services, and purely digital products delivered electronically fall outside the tax as well.
When You Owe It
The most common trigger is an online or mail-order purchase from an out-of-state seller that doesn’t charge California tax. After the Supreme Court’s 2018 Wayfair decision, large remote sellers generally must collect. Smaller sellers without enough California volume may still not. When they don’t, you owe.
Travel is the second common trigger. Buy furniture in Oregon, which has no sales tax, and ship it home to California, and the full California rate applies to that purchase. The same logic covers anything you bring back from a state with a lower rate than yours, though you get credit for what you already paid (more on that below).
Private-party purchases can trigger use tax too, but a broad exemption covers most of them. Buy a used couch from a neighbor at a garage sale and you likely owe nothing under the “occasional sales” exemption in Revenue and Taxation Code Section 6367.1California Department of Tax and Fee Administration. Sales and Use Tax Law – Section 6367 – Occasional Sales The exemption doesn’t apply to vehicles that have to be registered with the DMV, or to vessels, aircraft, and mobilehomes.
Occasionally a California retailer simply fails to collect sales tax on a taxable sale. Technically, you still owe use tax on that purchase.
Vehicles, Vessels, and Aircraft
If you buy a vehicle out of state and later register it in California, the DMV typically collects the use tax at registration rather than leaving it for you to self-report.2California Department of Tax and Fee Administration. Tax Guide for Purchasers of Vehicles The same goes for vessels and aircraft. California presumes that a vehicle bought outside the state and brought in within 12 months was purchased for California use if you’re a California resident, or if the vehicle becomes subject to California DMV registration during that first year.3California Department of Tax and Fee Administration. 12 Month Test – Not Purchased for Use in California You can rebut that presumption with documentation showing genuine use elsewhere, such as proper out-of-state registration.
What’s Exempt
If an item would be tax-free at a California store, it’s also tax-free as a use tax purchase.
- Most groceries. Food products for human consumption are generally exempt, unless sold heated, served as meals, or consumed on the seller’s premises.4California Department of Tax and Fee Administration. Common Sales and Use Tax Nontaxable Sales and Partial Exemptions
- Prescription medicine and certain medical devices.5Taxes. What Is Taxable
- Items paid for with CalFresh (EBT) benefits.5Taxes. What Is Taxable
- Sales to the federal government and its instrumentalities.4California Department of Tax and Fee Administration. Common Sales and Use Tax Nontaxable Sales and Partial Exemptions
Digital Products
Purely electronic deliveries generally aren’t subject to California sales or use tax. Software downloaded from a server, eBooks, mobile apps, digital images, and streaming content transmitted over the internet don’t qualify as tangible personal property.6California Department of Tax and Fee Administration. Internet Sales – Nontaxable Sales The exemption disappears, though, if the seller also provides a physical copy such as a flash drive or printed version. In that case the entire sale becomes taxable.
Credit for Tax Paid to Another State
California doesn’t double-tax you. If you already paid sales or use tax to another state on the same item before bringing it home, you get a dollar-for-dollar credit against your California use tax under Revenue and Taxation Code Section 6406.7California Department of Tax and Fee Administration. Sales and Use Tax Law – Section 6406 The credit can’t exceed the California tax due. Buy furniture in a state with a 5% rate when your California location sits at 8.5%, and you owe California the 3.5% difference. If the other state’s rate was higher, you owe nothing here, but you don’t get a refund of the overage either.
The credit covers tax paid to any U.S. state, political subdivision, or the District of Columbia. It doesn’t apply to taxes paid to foreign countries or U.S. territories like Guam or Puerto Rico.8California State Department of Motor Vehicles. Credit for Tax Paid to Another State
Calculating What You Owe
Use tax is figured on the purchase price at the combined sales and use tax rate for where you use or store the item. The statewide base is 7.25%, and local district taxes raise the effective rate in most areas.9California Department of Tax and Fee Administration. California City and County Sales and Use Tax Rate Information Combined rates run from 7.25% in a few unincorporated areas up to 11.25% in cities like Lancaster.10California Department of Tax and Fee Administration. California City and County Sales and Use Tax Rates – Cities, Counties and Tax Rates You can look up your exact rate on the CDTFA website by address.
On a $500 piece of equipment at a 9.5% local rate, use tax works out to $47.50, less any credit for tax already paid to another state on that purchase.
Shipping and Handling
Whether shipping ends up in the taxable amount depends on how the seller invoices it. Actual transportation charges by a common carrier or the postal service are excluded, but only when separately stated and representing the real cost of delivery. A line labeled “shipping and handling” gets split: the shipping portion can be excluded, the handling portion is taxable. A charge labeled only “handling” is always taxable.
How to Pay
How you report use tax depends on who you are and what you bought.
On Your State Income Tax Return
The simplest route for most people is Form 540, Line 91. You’re required to enter a figure there, even if it’s zero. For individual non-business purchases under $1,000 each, you can use the Estimated Use Tax Lookup Table in the Form 540 instructions, which estimates your tax based on adjusted gross income. If any single item cost $1,000 or more, or the purchase was for business use, use the Use Tax Worksheet instead.11Franchise Tax Board. 2025 Instructions for Form 540 California Resident Income Tax Return
Directly to the CDTFA
If you’d rather not wait for tax season, or if you don’t file a California income tax return, you can report and pay directly through CDTFA online services by filing a one-time use tax return for the purchase.12California Department of Tax and Fee Administration. California Use Tax Basics Publication 110 – Paying Use Tax Electronic payment from a bank account carries no fee.13California Department of Tax and Fee Administration. Online Services – Make a Payment
Vehicles
For vehicles, you generally pay at the DMV during registration rather than on your income tax return. The DMV collects and remits it to the CDTFA. If you financed an out-of-state purchase and the use tax was rolled into the loan, the out-of-state dealer may issue a check payable to the California DMV for the tax amount.14California State Department of Motor Vehicles. Transactions Subject to Use Tax
Businesses
If you hold a seller’s permit, report use tax on your regular sales and use tax return, listing the purchase under “Purchases subject to use tax” for the period you first used, stored, or consumed the item in California.12California Department of Tax and Fee Administration. California Use Tax Basics Publication 110 – Paying Use Tax Filing frequency gets assigned based on your reported or anticipated taxable sales and can be monthly, quarterly, or yearly.15California Department of Tax and Fee Administration. Doing Business in California Publication 51 – Tax and Fee Rates and Filing Frequencies Businesses without a seller’s permit that accumulate more than $10,000 in untaxed purchases in a calendar year have to register separately as a “qualified purchaser” with the CDTFA.16California Department of Tax and Fee Administration. Sales and Use Tax Law – Section 6225
If You Don’t Pay
Skipping use tax doesn’t quietly go away. A 10% penalty applies to the unpaid tax. If you were required to file a return and missed the deadline, another 10% penalty attaches to the tax due for that period, capped at 10% of the tax for any single return.17Justia. California Revenue and Taxation Code – Article 6 Interest and Penalties
Interest stacks on top. For 2026 the CDTFA charges 10% annual interest on deficiencies, a rate recalculated every six months based on the federal rate plus three percentage points.18California Department of Tax and Fee Administration. Interest Rates On a small purchase the numbers stay modest; on a vehicle or business equipment they compound fast.
The CDTFA has three years from the last day of the month following the quarter the return was due to issue a deficiency notice. If you never filed a return at all, that window stretches to eight years. Unfiled use tax can surface in an audit years after the purchase.
Records to Keep
The CDTFA requires you to hold onto receipts, invoices, and shipping documents for at least four years.19California Department of Tax and Fee Administration. Sales and Use Tax Records Publication 116 – Retaining Records If you’re under audit, keep everything covering the audit period until it’s resolved, even past the four years. If you’re claiming an item was bought for use outside California and shouldn’t be taxed, keep documentation that backs that up, like out-of-state registration, delivery receipts, or proof of first use somewhere else.20California Department of Tax and Fee Administration. California Use Tax for Foreign Purchases The burden of proving an exemption or exclusion is on you.