Article
California revises requirements for qualified purchaser program registration
Oct. 26, 2023 · Authored by Curtis Miyaji and Andrew Cheng
Governor Gavin Newsom of California signed Assembly Bill (AB) No. 1097 on Oct. 7, 2023. The new law introduces a significant change to a key criterion that dictates when an individual or business is required to register with the California Department of Tax and Fee Administration (CDTFA) for use tax purposes.
Background
In California, use tax is required to be paid by anyone who stores, uses, or consumes tangible personal property within the state, provided no sales tax was collected by the seller at the time of purchase.
California established the Qualified Purchaser Program in 2009, requiring qualified purchasers to register with the CDTFA to report and remit use tax on their purchases of taxable items from sellers who don’t collect California sales tax. Qualified purchasers must file a use tax return with the state by April 15, annually.
The purpose of the program was to require taxpayers who are primarily service providers — and not required to register and file sales tax returns — to register for a use tax permit and report and pay any use tax on purchases from out-of-state vendors.
Under the Qualified Purchaser Program, a qualified purchaser was any individual or business that satisfied all the following conditions:
- Not required to hold a seller's permit or certificate of registration for use tax
- Not holding a use tax direct payment permit
- Receiving at least $100,000 in gross receipts from business operations per calendar year
- Not otherwise registered with the CDTFA for reporting use tax
What’s changed
AB-1097 amends the definition of qualified purchaser. The previous condition that an individual or business receive at least $100,000 in gross receipts per calendar year, as described above, has been replaced with a new condition that an individual or business make more than $10,000 in purchases subject to use tax per calendar year. Consequently, individuals and businesses are now required to register with the CDTFA for a qualified purchaser use tax account if they meet all the following conditions:
- Not required to hold a seller's permit or certificate of registration for use tax
Related sections
The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.