Tax Guide for Purchases of Log Home or Log Cabin Kit
We understand that the use tax concept can be confusing to some people who make purchases from out-of-state retailers. The intention of this guide is to help home owners understand how the use tax applies to their out-of-state purchases of log home or log cabin kits.
Use Tax Overview
Generally sales of real property such as land or a building in California are not subject to sales or use tax. On the other hand, sales of tangible personal property, that is, property that can be seen, weighed, measured, or touched, is generally subject to sales or use tax.
When you purchase an unassembled log home or log cabin kit, you are purchasing tangible personal property that is subject to tax. Generally the vendor will charge sales tax if the sale is made in California. However, when you purchase an item from a vendor located outside California who ships the property to California and is not required to collect California tax, use tax applies.
If you are a home owner who purchased a log home or log cabin kit from an out-of-state vendor without paying tax, you are required to report and pay the use tax on your purchase to the California Department of Tax and Fee Administration (CDTFA).
Why is the CDTFA Contacting me?
The CDTFA reviews county building records to contact home owners regarding the use tax. If you did not report the use tax to the Franchise Tax Board (FTB) for the tax year you purchased the package or to the CDTFA by the date the tax was due, you may be contacted by the CDTFA to either pay the use tax or show evidence of the use tax paid. Individual consumers report the use tax on a yearly basis with a due date of April 15th.
The CDTFA makes every attempt to contact home owners as soon as information regarding use tax becomes available. However by law, the CDTFA can assess use tax up to 8 years from the date the tax was due.
What records do I need to provide?
If you have already paid tax to your vendor, simply provide the CDTFA a copy of the invoice and proof of payment showing California tax paid. This will suffice as evidence you paid tax on your purchase of your log home or log cabin kit. If you cannot locate your purchase records, contact the out-of-state manufacturer or vendor and request a copy of the invoice.
The CDTFA will give you ample time to provide evidence showing tax was paid on your log home or log cabin kit. If you still choose to not comply, an estimated billing may be issued based on the best information available to the CDTFA.
Property Tax vs. Use Tax
Even though you may have already paid property tax on your log home or log cabin kit, use tax may still apply. The property tax is collected by the county and it is based on the assessed value of the real property. The use tax is due on the purchase price of the home package for use in the state but purchased from an out-of-state vendor who did not collect the tax.
The use tax rate is the same as the sales tax rate where the home will be built. The use tax is calculated by multiplying the purchase price by the applicable tax rate. We offer several tools to help you identify the correct tax rate. You can look up a tax rate by address or by city and county.
For example, you purchased a log cabin kit for $100,000 from an out-of-state vendor who did not charge you the California tax. The kit was delivered to you and used to build your cabin home located in South Lake Tahoe, El Dorado County. Your total use tax due would be $7,750 (purchase price $100,000 x applicable tax rate in South Lake Tahoe, El Dorado county, 7.75%*).
*The South Lake Tahoe tax rate during September 2017 was used in this example. You must use the rate in effect at the time of the sale. Current and historical tax rates can be found on our California City & County Sales & Use Tax Rates webpage.
Reporting and Paying Use Tax
There are different options available for paying your use tax:
- Pay the use tax to the FTB on your California individual income tax return.
For more information, see the “For Personal Use” section at Use Tax – What You Should Know.
- Pay the use tax directly to the CDTFA.
You may easily make a one-time payment for the use tax due online. Go to Registration – Main Menu and select the “Pay use tax and/or the lumber products assessment on one time purchase” option.
Beginning January 1, 2013, a new law requires a one percent (1%) assessment on purchases of lumber products and engineered wood products for use in California, based on the selling price of the products. However, lumber sold in a kit or package (ex: log homes or log cabin kits) are pre-cut, pre-drilled, or manufactured to some extent and therefore not subject to the Lumber Products Assessment.
If you can't pay the use tax, contact us as soon as possible to minimize any interest and fees due and to avoid imposition of penalty and collection actions. You may be eligible to get on a payment plan. For more information, go to Having Trouble Paying or see publication 54, Tax Collection Procedures. Generally, payment agreements are based on your ability to pay, as determined by the CDTFA.
If You Need Help
If at any time you need assistance with topics included in this guide – or with others we may have not included – feel free to contact us by telephone or email for assistance.