USE TAX IS SALES TAX

Recently, we have received many phone calls at the CMHI office regarding manufactured homes sold out of California where sales tax is not being charged.  These homes are then shipped to California and subsequently installed. The following is a brief explanation of use tax and how it applies.

Many consumers are unaware of the California Use Tax.  This tax has been around since 1935, yet many find it difficult to understand or explain.

The law states that everyone who buys goods elsewhere that will be used, consumed or enjoyed inside the state is liable to pay a use tax, even when the out-of-state retailer doesn't charge or collect sales tax.

The tax is designed to protect California merchants that might be at a competitive disadvantage when compared to the out-of-state retailer making sales to California customers without charging them sales tax.  Although the tax rates of sales tax and use tax are the same, the difference is that California retailers must collect sales tax for the state and use tax is the responsibility of the consumer to report and pay.

The Consumer Use Tax section of the Board of Equalization receives reports from the DMV, FAA and HCD as well as the United States Coast Guard on identity transfers and registrations of vehicles, aircraft, manufactured homes and vessels.  The Board requires the payment of use tax prior to completing transfer of title or new registration.  Failure to pay by the consumer can result in severe penalties.

For more information about the California Use Tax visit the Board of Equalization website at www.boe.ca.gov.