Tax Guide for Veteran's Tax Topic
We recognize that understanding tax issues related to veterans can be time-consuming and complicated, and want to help provide the information you need. We have created this page to help you better understand the Sales and Use tax topics that are important to veterans and veteran's organizations.
If you own a business in California and you expect to be making taxable sales, you must register with the California Department of Tax and Fee Administration (CDTFA) for a seller's permit and file sales and use tax returns. Generally, sales tax applies to a veteran's sales as it would to anyone else. However, there are laws that allow qualified veterans and veteran's organizations to make certain sales which are not subject to tax.
Itinerant Veteran Vendor (This law has ended December 31, 2021.)
The itinerant veteran vendor program was authorized by legislation from April 1, 2010, through December 31, 2021. If you were a qualified itinerant veteran vendor during this period, you were the consumer of items owned and sold, except alcoholic beverages or items sold for more than $100, and you were not required to hold a seller's permit. Instead, you were required to pay sales or use tax on your purchases of all taxable items that you intended to sell.
A person is a "qualified itinerant vendor" when all the following apply:
- The person was a member of United States Armed Forces, who received an honorable discharge or a release from an active duty under honorable conditions,
- For the purpose of selling tangible personal property, the person is a sole proprietor with no employees,
- The person has no permanent place of business in this state, and
- The person is unable to obtain a livelihood by manual labor due to a service-related disability.
Persons who are generally considered to not have a permanent place of business may include: vendors who only sell from mobile food carts, beverage stands, or lunch wagons, and vendors who only sell at swap meets or other special events.
Examples of goods and services commonly sold by qualified itinerant veteran vendors include:
groceries, firewood, Christmas trees, fireworks, automotive tools, vitamins, cosmetics, clothing, curtains, appliances, electronic goods, furniture, rugs, computer accessories, kitchenware, jewelry, books, flowers, magazines, art, souvenirs, interior design services, home repair services, landscaping, computer repair, and mobile windshield repairs.
Starting January 1, 2022, itinerant veteran vendors that qualified for the above exemption are required to obtain a seller's permit, file sales and use tax returns, and pay tax on their sales to consumers in California.
Nonprofit Veterans' Organization
If you are a nonprofit veterans' organization that makes sales of merchandise or goods, you are required to register for a seller's permit. Generally, items you sell are taxable.
This is true whether you buy the items, make them, or receive them as a donation. Items you purchase can be bought with a resale certificate if you intend to resell them. You should not purchase items for use by your group with a resale certificate; instead, you should pay tax to your supplier on these items.
When you sell American flags, if the profits are used exclusively by the organization, sales of the flags are not taxable. However, you should pay tax to your supplier when you purchase flags or materials used to make them.
When you sell “Buddy Poppies” or similar symbolic, temporary lapel pins, the purchase and sale of the items are not taxable when both of the following conditions are met:
- The pins are sold or purchased by the Veterans of Foreign Wars or other specified organizations.
- The pins memorialize U.S. military veterans killed in foreign wars.
Tax does not apply to your sales of meals and food products when all of the following conditions are met:
- You sell the food or meals at a social or other gathering you conduct.
- You furnish the meals or food to raise funds for your organization's functions and activities.
- You use the proceeds to carry out those functions and activities.
Note: If you sell carbonated and alcoholic beverages included in a single price of a meal, those items are not taxable. If you sell carbonated or alcoholic beverages for a separate price, those items are taxable.
You should report all your sales on the sales and use tax return. You may claim a deduction for sales not taxable under “Other deductions” and provide a clear explanation (for example, flag sales by nonprofit veterans' organization).
For more information, please see publication 18, Nonprofit Organizations.
Sales Made on State-Designated Fairgrounds
Effective July 1, 2018, if you are a retailer who makes sales of tangible personal property that take place on the real property of a California state-designated fair ("state-designated fairground"), you must separately state the amount of those sales on your sales and use tax return. Sales that take place on state-designated fairgrounds include over-the-counter sales on the fairgrounds and also may include sales in which the property is shipped or delivered to or from the fairground.
The separately reported amount will be used for funding allocation purposes only. There is no additional tax or fee due on these sales. For more information on the new reporting requirement, please see Tax Guide for Reporting Requirements on State-Designated Fairgrounds.
Vehicle Allowance from the U.S. Department of Veterans Affairs Not Subject to Sales or Use Tax
Veterans with a service-connected disability may be eligible to receive financial assistance from the U.S. Department of Veterans Affairs (VA) towards the purchase of a vehicle. Eligible veterans must have VA approval prior to making the purchase. The VA will pay the approved amount directly to the seller and the approved veteran is responsible for paying any remaining cost of the vehicle to the seller. The portion of the vehicle's purchase price paid by the approved veteran is subject to sales or use tax. The portion of the vehicle's purchase prices paid by the VA is considered a sale to the U.S. Government and not subject to sales or use tax.
You are an eligible service member and were approved by the VA for a $5,000 allowance towards the purchase of a vehicle. The total purchase price of the vehicle is $10,000; you and the VA each pay $5,000 directly to the seller. Sales or use tax applies to the portion you paid to the seller; i.e., $5,000.
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