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State of California Franchise Tax Board

FTB Provides Tips Regarding Use Tax Line on State Return

Taxpayers Asked to Report and Pay Use Tax on Items Purchased Out of State

California taxpayers being asked to report and pay use tax on items purchased from an out-of-state retailer on their 2003 state income tax returns are having difficulties resulting in errors, according to the Franchise Tax Board (FTB).

The new line item applies only to those consumers who made out-of-state purchases of taxable goods that were not charged California sales tax. This happens, for example, on items purchased over the Internet, by mail order or telephone, or in person while out-of-state.

New this year, the state tax form contains a line to report and pay any use tax owed. Consumers owe California use tax on items purchased for consumption, use, or storage. The State Board of Equalization generally collects the use tax.

Early returns received by the FTB show some taxpayers are incorrectly entering their county's sales tax rate, instead of the amount of tax owed, on the use tax line; others are entering their income tax refund amount on the use tax line.

Instructions for the use tax appear in the tax booklets and in tax software programs. On Form 540, for example, a worksheet appears on page 21. Taxpayers can calculate their total use tax due and then enter the amount on line 51, immediately after the “tax due” line. The use tax amount will lessen the amount of the refund or increase the amount owed.

A Use Tax Return was included in the 2002 Personal Income Tax booklets. This year, California is one of 19 states that include a use tax line on state income tax returns.

For more information regarding California's use tax, check out Use Tax Information for State Income Tax Filers at:

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