Sales Tax Obligations of a Purchaser in California

April 13, 2006

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Although sellers bear the responsibility for paying the sales tax, the law in California allows sellers to pass this additional expense on to you. If this the case with purchases you make, review the following section to find out how to handle sales tax issues that may apply to you.

Sales tax exemptions. California allows exemptions from sales tax based on the type of transaction (such as a resale exemption), or the nature of the organization purchasing the product (such as a charitable organization).

In addition, the state provides a resale exemption to you if you're a service provider who purchases tangible property that will be transferred to your customers as incidental to the provision of your services. If you want this exemption, you must present the seller with a valid resale exemption certificate.

Resale exemptions. If you purchase goods or products and will resell them in your business, or include them as part of the service you provide, you may claim a resale exemption from sales or use taxes. However, you will have to collect sales tax from your customers when they purchase the goods or products.

Resale exemption certificate. In order to obtain a resale exemption, the seller may require you to present, in good faith, a resale certificate. The state doesn't provides a specific certificate form for you to use, so you're free to develop your own resale certificate document. With that said, though, the document should at least contain the following information:

your and the seller's name and address
an indication of the general character of the property you are purchasing
your seller's permit number
your or your agent's signature and the date the certificate was signed

Blanket resale certificate. California allows you to use blanket resale certificates. A blanket resale certificate is a resale certificate that you provide to a seller from whom you make numerous exempt resale purchases. The idea is that by providing a blanket resale certificate, both you and the seller can avoid the hassle of having to deal with a new certificate every time you make a purchase. The law does not set forth any specific procedures for accepting a blanket resale certificate. However, you should present a blanket resale certificate to the seller that includes the same information as a regular resale certificate.

Use tax liability on out-of-state purchases. If you buy taxable property from an out-of-state seller, you're going to have to pay a use tax on the purchase price of the property. This tax should be paid directly to the state.

Small business deductions or credits. California does not provide for any special small business deductions from sales or use taxes. However, the state allows you to take a credit against use tax if you have already paid sales or use tax to another state on the property purchased. This credit cannot exceed the amount of sales tax assessed in California.