Qualified Purchaser Program

Assembly Bill x4-18, enacted in 2009, added section 6225 to the Revenue and Taxation Code, which requires a "Qualified Purchaser" to register with the California Department of Tax and Fee Administration (CDTFA) and report and pay use tax directly to the CDTFA.

Generally, a "Qualified Purchaser" is a business or person that receives at least $100,000 in gross receipts from business operations per year, and is not otherwise required to be registered with the CDTFA. Qualified Purchasers are required to register with the CDTFA and report and pay use tax due on purchases made from out-of-state retailers. Please visit the Qualifications page for more information.

If you have a California business, meet the requirements of a qualified purchaser, and have use tax to report, you can register online using electronic registration (eReg). Please visit the Registration page for more information.

For an explanation of use tax, please see California Use Tax Information, Publication 123, California Businesses: How to Identify and Report California Use Tax Due, or Publication 110, California Use Tax Basics.

A "Qualified Purchaser", as defined in section 6225 of the Revenue and Taxation Code, is a person that meets all of the following conditions:

  • The person receives at least $100,000 in gross receipts from business operations per calendar year.
  • The person is not required to hold a seller's permit or certificate of registration for use tax (under section 6226 of the Revenue and Taxation Code).
  • The person does not hold a use tax direct payment permit as described in section 7051.3 of the Revenue and Taxation Code.
  • The person is not otherwise registered with the CDTFA to report use tax.

A "person" is defined in section 6005 of the Revenue and Taxation Code.

Not Engaged in Business in California. If you are not engaged in business in California and have no business location or business presence in California, but you use a California address for your income tax return (such as a CPA or tax preparer), you are not required to register.

Gross Receipts from Business Operations

Gross receipts from business operations include the total of all amounts received from goods and services from both in-state and out-of-state business operations before subtracting any costs or expenses. The following are common federal income tax forms that are used to determine gross receipts:

  • Form 1040 – Individual Income Tax Return
  • Form 1065 – Partnership Income Tax Return
  • Form 1120 – Corporate Income Tax Return
  • Form 1120s – S Corp Income Tax Return
  • Schedule C – Profit or Loss From Business
  • Schedule E – Supplemental Income or Loss
  • Schedule F – Profit or Loss From Farming
  • Form 4835 – Farm Rental Income & Expenses
  • Form 1099DIV – Dividends & Distributions
  • Form 1099MISC – Miscellaneous Income

Multiple Businesses. Gross receipts from all businesses with the same ownership in a calendar year are used to calculate the $100,000 minimum requirement as defined in section 6225 of the Revenue and Taxation Code. For example:

  • For federal income tax purposes, you report $75,000 in gross receipts from your legal services business, and you report $60,000 in gross receipts from your marketing business. For purposes of California Revenue and Taxation Code section 6225, you are considered to receive at least $100,000 in gross receipts.
  • For federal income tax purposes, you report $50,000 in gross receipts on Schedule C (Profit or Loss From Business), $40,000 in gross receipts on Schedule E (Supplemental Income or Loss which is used to report rental income, royalties, and other types of income), and $40,000 in gross receipts on Schedule F (Profit or Loss From Farming). For purposes of California Revenue and Taxation Code section 6225, you are considered to receive at least $100,000 in gross receipts.
  • For federal income tax purposes, you report $80,000 in gross receipts from real estate rentals in Nevada, and $80,000 in gross receipts from real estate rentals in California. For purposes of California Revenue and Taxation Code section 6225, you are considered to receive at least $100,000 in gross receipts.

Exempt for Income Tax Purposes. If your business is considered exempt for income tax purposes, you will be considered a Qualified Purchaser if your gross receipts are at least $100,000. While your status is exempt for income tax purposes, you are not exempt for sales and use tax purposes.

1099 Income. If you report 1099 income as business income on Schedule C, it will be used to determine gross receipts from business operations. If you are a statutory employee, your 1099 income generally qualifies as gross receipts for business operations.

Gross Receipts Yearly Threshold

If your yearly gross receipts are at least $100,000, you are considered a Qualified Purchaser. However, if your gross receipts drop below the $100,000 threshold for the last two consecutive years, you are allowed to close your qualified purchaser use tax account. However, you are still required to report and pay use tax on future purchases made without tax from out-of-state retailers. Please note that this closeout process is not automatic; therefore, you may close your account by contacting your local CDTFA office and providing sufficient documentation indicating your gross receipts from business operations fell below $100,000 for the last two consecutive years. If your gross receipts from business operations are below $100,000, but you have use tax to report, please use BOE-401-DS, Use Tax Return, or your Franchise Tax Board Returns to report the use tax due.

Automatic Close-out

The CDTFA will automatically close your qualified purchaser use tax account after you have filed returns for three consecutive years and have not reported any purchases subject to use tax. If your account has been closed, you will receive a notice of closeout. However, if you meet the $100,000 threshold requirements of Revenue and Taxation Code 6225 in the future and make purchases subject to use tax, you must re-register with the CDTFA.

Insurance Company. Insurance companies that pay the gross premium tax with returns filed with the Department of Insurance do not have to register as a Qualified Purchaser.

If you have a California business, meet the requirements of a qualified purchaser, and have use tax to report, you can register online using electronic registration (eReg).

Once You are Registered

  • You will be required to file your use tax returns using CDTFA-file, CDTFA’s free electronic filing (eFile) system that enables taxpayers to use the Internet to file a sales and use tax return and make payment for amounts due.
  • After you have completed registration through eReg, you can use your eClient User ID and password to efile your use tax returns. Returns will be available the next business day after registering for a permit.
  • If you are required to efile use tax returns for prior years, you will need to file those use tax returns immediately.
  • Each subsequent calendar year’s use tax return is due on or before April 15 for the preceding year’s use tax purchases (If the due date falls on a Saturday, Sunday, or legal holiday, returns are due the following business day).
  • Please visit the File a Return page for more information.

Seller’s Permit Holders

  • If your only business is one that requires you to hold a seller’s permit, you do not need to register for a use tax account.
  • If you have a business that requires you to hold a seller’s permit and a service business under the same legal entity, you do not need to register for a use tax account. You must report purchases subject to use tax for your service business on your sales tax return.
  • If you have a business that requires you to hold a seller’s permit and a separate service business that are different legal entities, you will be required to hold two accounts and file two returns. You must report purchases subject to use tax for the business requiring a seller’s permit on the sales tax return. You must report purchases subject to use tax for the service business on the annual use tax return.

Multiple Businesses

  • If you receive gross receipts from business operations from multiple businesses, none of which require you to hold a seller’s permit, you only need to register for one account and only need to file one annual use tax return.

Statute of Limitations

  • Revenue and Taxation Code section 6487, Limitations, deficiency determinations, subdivision (a) gives the CDTFA the authority to determine the amounts owed for use tax going back up to eight years (longer if fraud is detected) and the CDTFA reserves the right to do so. As a matter of administrative efficiency, however, in most cases the CDTFA only requests returns to be filed for purchases made in the last three years.

Updating Registration Information

  • Once you are registered, your account will be set up so that you file returns electronically using eFile, the CDTFA’s free eFiling system.
  • You will receive a registration letter containing your account number and express login code. These two numbers will enable you to efile your use tax returns online. The procedure is fast, easy, and accurate.
  • If you did not receive or cannot locate your registration letter with the express login code and account number, either call your local CDTFA office for assistance, or contact our Taxpayer Information Section at 800-400-7115 (TDY:711). Customer service representatives are available Monday through Friday, 8:00 a.m to 5:00 p.m. Pacific time, excluding state holidays.
  • To learn how to efile, please visit the following pages on our website:

Due Dates of Returns

Use tax is due on or before April 15 for the preceding year's use tax purchases. If the due date falls on a Saturday, Sunday, or legal holiday, returns are due the following business day.

Closed Business

If you are a registered qualified purchaser and your business has closed, you still need to file a return for the period(s) in which your business operated. Once you file your return(s), submit form BOE-345-QP, Qualified Purchaser ­ Registration Update, to notify the CDTFA that your business has closed.

Filing Returns and Reporting Zero Purchases Subject to Use Tax for Three Consecutive Years

The CDTFA will automatically close your account after you have filed for three consecutive years and have not reported any purchases subject to use tax. If your account has been closed, you will receive a notice of closeout. However, if you meet the $100,000 threshold requirements of Revenue and Taxation Code 6225 in the future and make purchases subject to use tax, you must re-register with the CDTFA.

Penalties and Interest

A penalty equal to 10 percent of the tax due and interest will be applied for returns filed after the due date of the return. The CDTFA may grant relief of penalty charges, but not interest, if it is determined that a person's failure to file a timely return or payment was due to reasonable cause and circumstances beyond the person's control. A Request for Relief from Penalty may be submitted using the Relief Requests service.

If an electronic tax payment associated with filing a return or prepayment is late by only one business day, you may be eligible to have the interest associated with the late payment reduced.

Interest accrues on any unpaid tax balance after the due date of the return. Interest may only be relieved if the delay in paying the tax was due to an unreasonable error or delay on the part of CDTFA staff (Revenue and Taxation Code section 6593.5). To stop interest from accruing, you will need to efile your use tax return and pay the total tax due.

For more information on interest and penalties, please refer to Publication 75, Interest and Penalties.

Reporting Use Tax on Franchise Tax Board (FTB) Returns

As a Qualified Purchaser, if you previously reported your business related purchases subject to use tax on your FTB income tax returns, you will now be required to register with the CDTFA and report your business purchases subject to use tax on a use tax return. You must file use tax returns with the CDTFA for the years in which you are required to file, even if you have already reported use tax on your FTB income tax returns for those years. However, you should continue to report use tax on any purchases for personal use on your FTB return.

When you file your use tax returns:

  • You may claim the amount of tax you reported on your FTB income tax returns on the same line that allows you to claim the amount of tax imposed by other states.
  • Do not file an amended income tax return with the FTB.
  • If you over-paid your use tax on your FTB income tax return, you will need to file form CDTFA-101, Claim for Refund or Credit with the CDTFA.

Claim For Refund

If you overpaid your use tax liability, you may file a claim for refund with the CDTFA. You may use form CDTFA-101, Claim for Refund or Credit, to file your claim and mail it to the address below:

Board of Equalization
Refund Section, MIC: 39
PO Box 942879
Sacramento, CA 94279-0039

Generally, use tax applies when a person or business in California purchases tangible merchandise to be used, consumed, given away, or stored in California from a retailer outside of this state who does not collect California tax on the sale. In other words, if sales tax would apply when a particular item is purchased in California, use tax applies when a similar purchase is made from a retailer outside the state and tax is not charged.

Tax collected by the retailer here in California is called sales tax, and the retailer is responsible for reporting and paying the tax to the state. When an out-of-state or online retailer doesn't collect the California tax for an item delivered to California, the purchaser may owe use tax, which is simply a tax on the use, storage, or consumption of personal property in California.The use tax rate in California locations is the same as the sales tax rate. Consumers are responsible for reporting and paying the use tax.

Generally, a qualified purchaser is a business or person that receives at least $100,000 in gross receipts from business operations per year, and is not otherwise required to be registered with the CDTFA. Qualified purchasers are required to register with the Board of Equalization (CDTFA) and report and pay use tax due on purchases made from out-of-state retailers without paying tax.

If your annual gross receipts from business operations are $100,000 or greater, you must register. You can register online using electronic registration (eReg).

Yes. If your gross receipts from business operations are greater than $100,000 per year, you are considered a qualified purchaser and should be registered with a qualified purchaser use tax account. A return must be filed even if you did not make any purchases subject to use tax during the reporting period. In such cases, you will simply enter zero as the amount of purchases for the calendar year in which you are reporting.

If your gross receipts from business operations fall below $100,000 for the last two consecutive years, you are allowed to close your qualified purchaser use tax account. This closeout process is not automatic; therefore, you may close your account by contacting your local CDTFA office and providing sufficient documentation indicating your gross receipts from business operations have fallen below $100,000 for the last two consecutive years.

If you are not required to hold a seller's permit or use tax account, the easiest way to pay use tax is to report it on your California Income Tax Return found at the Franchise Tax Board website. Follow the instructions included with your income tax return. Complete the worksheet included in those instructions to determine the amount of your use tax liability.

After your account is closed, if you make purchases subject to use tax and meet the $100,000 gross receipts threshold requirement of RTC 6225, you must re-register and file a qualified purchaser use tax return.

If your business has closed, but you received at least $100,000 in gross receipts during any calendar year while it was in operation, you still need to register and efile a return for the period(s) in which your business operated. Once you efile your return(s), submit form BOE-345-QP, Qualified Purchaser ­ Registration Update, to notify the CDTFA that your business has closed.