Taxes: buy wedding ring in Oregon, but ship to California

Question

I am planning to buy an expensive wedding ring in Oregon to save on sales tax, and ship it home to California to then propose to the long-term girlfriend. If I showed up at a jewelry shop in Oregon and make the purchase with a credit card (associated with my home address in Calfornia) and had it shipped from the manufacturing facility (which may be elsewhere entirely) to California, would there be any associated taxes in the process?

Answer 1

Most states that have a "sales" tax actually have a sales and use tax.

The sales tax covers the situation where you buy an item in state X and you use it in state X. The use tax covers the situation where you buy it in state Y and use it in state Z.

State Z where you will be using it wants you to pay the use tax for the item. They do exempt you from the Use tax if you did pay a sales tax to state Y.

So when you have an item shipped to your home state, and the the company doesn't have a store in your state. They don't charge you a sales tax, but your state wants a to pay the Use tax.

For California the sales and use tax overview:

California's sales tax generally applies to the sale of merchandise, including vehicles, in the state. California's use tax applies to the use, storage, or other consumption of those same kinds of items in the state.

Generally, if sales tax would apply when you buy physical merchandise in California, use tax applies when you make a similar purchase without tax from a business located outside the state.

For these purchases, the buyer is required to pay use tax separately.

For more specifics

What items are subject to use tax

Generally, if the item would have been taxable if purchased from a California retailer, it is subject to use tax.

For example, purchases of clothing, appliances, toys, books, furniture, or CDs would be subject to use tax. Purchases not subject to use tax include food for human consumption such as peanut butter and chocolate. Electronically downloaded software, music, and games are not subject to tax if no tangible storage media is obtained. See Foreign Purchases for item(s) purchased in a foreign country and personally carried into this state.

How do I calculate what I owe?

Use the sales and use tax rate applicable to the place in California where the item is used, stored, or otherwise consumed and apply it to the total purchase price. For personal purchases, this is usually your home address. Include handling charges.

Example Question: I bought a stereo online for $200, including shipping, and had it sent to my home. But, I was not charged tax during the purchase. How much use tax do I owe? Answer: Find your local tax rate at the time of the purchase on this webpage. If your local rate is 8.0%, then you would owe $16 in use tax ($200 × .08 = $16).

Shipping charges are generally not taxable when items are shipped by common carrier or US Mail, the invoice separately states charges for shipping, and the charge is not higher than the actual cost for shipping.

How do I pay the tax due?

Use tax is owed by April 15th the year after you make a purchase for which California tax was not charged. You can either pay once a year when you file your state income taxes, or make payments directly to the BOE after each purchase.

Option 1: Pay on Your State Income Tax Forms

On your California state income taxes, using forms 540 or 540Z, simply put in the amount owed on the appropriate line for the entire year1.

You can save all of your receipts and report the exact amount you owe or follow the instructions included with your income tax return to use the Use Tax Lookup Table for nonbusiness items with a purchase price under $1,000. Learn more about the lookup table.

Option 2: Make Payments Directly to the Board of Equalization

You may pay use tax on a one-time purchase item(s) directly to us. Follow log-in and step-by-step reporting and payment instructions. You may also pay use tax on a one-time purchase item(s) with our ePay mobile application.

If you are late in paying your use tax, you may eligible to pay a liability from a previous year and avoid late payment penalties under our In-State Voluntary Disclosure Program.