San Francisco's Gelardi Tax Service Explains California Use Tax, In Light of Recent Amazon Compromise

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With the news of an agreement reached between Amazon and California to begin charging residents sales tax for online purchase in 2012, the term “use tax” has been in the news lately. Gelardi Tax Services, a Daly City-based tax service company, explains what the use tax is and advises California residents about reporting it on their taxes.

Gelardi Tax Services

If, as taxpayers, we are not going to file the returns on use tax, then it could become mandatory, and if you make a certain amount of income, you can be assessed the tax

The online retailer Amazon and the State of California have recently come to an agreement ending months of contentious negotiations over whether items purchased online by California residents should be subject to California’s use tax. http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2011/09/14/bloomberg1376-LRA59R0UQVI901-4660VQS63T8A32J7LR5729CR81.DTL The agreement gives Amazon one year to begin charging taxes for California purchases. The whole ordeal has led many people to wonder, what is a use tax, anyway? San Francisco tax services specialist Lisa Gelardi explains.

A use tax is a type of tax assessed upon an otherwise tax free commodity or property purchased by a resident of the assessing state for use in that state, regardless of where the purchase took place. This means a California resident who purchases an item outside of California but uses it in California is required to pay tax to the state of California. It is the equivalent of sales tax for purchases where sales tax was not collected. Use tax is collected in 22 states, including California.

In California, use tax was first enforced in 2007. In 2008, $34 billion was generated in tax revenue in the second quarter from use tax collections. Due to the crisis in the economy, California wants to generate more revenue by making use tax mandatory.

“If, as taxpayers, we are not going to file the returns on use tax, then it could become mandatory, and if you make a certain amount of income, you can be assessed the tax. For example if you make $45,000, you could be assessed a $36 use tax. If as a collective group we file a use tax return to prove we do or do not buy out of state then it may not be mandatory,” said Lisa Gelardi of San Francisco's Gelardi Tax Services.

Taxpayers are allowed to report use tax for single non-business purchases of $1,000 or less on their Fringe Benefit Tax return using either the actual amount of tax due or the amount shown on a lookup table, which would indicate an estimated amount of use tax due based on the person’s annual gross income.

For more information about use tax or how San Francisco's Gelardi Tax Services could help you in your tax preparation, call 415-233-7764 or visit http://www.gelarditaxservices.com. You can also visit their office at 332 Glenwood Ave., Daly City, CA 94015.

About Gelardi Tax Services
As a small business owner in San Francisco, Lisa Gelardi is more cost-effective and easier to get a hold of for tax help than larger tax assistance firms. Available year round for preparation and planning, she’ll even travel to clients in the Bay Area to save time. She uses electronic returns solutions, making it faster and easier to prepare and file her clients’ returns.

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Lisa Gelardi
Gelardi Tax Service
(415) 233-7764
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