Use tax is a tax imposed upon the users (the University and all other consumers) of tangible personal property shipped from out-of-state for use, storage or consumption in California. It is the tax that is imposed upon the user when the seller (usually an out-of-state vendor) does not collect California Sales Tax.

The FlexCard Allocation Module adds use tax to charges by all merchants

(a) whose billing address is out-of-state

AND

(b) which do not break out sales tax (if collected) as a subtotal of the total FlexCard charge.

A new Vendor Database is under development that will include a field indicating whether an out-of-state merchant collects California sales tax. Since use tax is assessed only if the out-of-state merchant does not collect California sales tax, in future FlexCard will check against this database and not add use tax to transactions from these merchants. This will considerably reduce the number of use tax adjustments that departments need to make.

No, use tax does not always need to be paid. In addition to instances where the out-of-state merchant has already charged California sales tax, there are three other situations in which use tax is not appropriate:

(a) if all or part of the item purchased is not subject to taxation; for example, labor, a software download with no physical deliverable, an optional software or equipment warranty or maintenance agreement, or a periodical subscription;

(b) if there any shipping or freight charges for delivery by a shipper other than the merchant (UPS, FedEx, US Postal Services, etc.);

(c) purchases from the US Government, other US states outside California and foreign governments; the exclusion includes the institutions of such non-California entities, such as state and national universities.

If all or part of the charge is exempt from use tax, enter the exempt amount in the Non-Taxable Subtotal field and enter the appropriate reason code in the RC field (double click in the field and you will be provided with a table of the most common reasons why a transaction may be exempt from use tax; for example, Reason Code 1 indicates that the merchant charge “includes California sales tax.”

If only the shipping or freight portion of the charge is exempt from use tax (for example, the purchase of taxable books from Amazon.com with a $25.00 rush delivery charge), enter the amount of the shipping or freight in the Freight field.

The original use tax assessment is decreased in proportion to the amounts entered into the Nontaxable Subtotal and Freight fields.

Yes, the overpaid use tax can be credited back to your department. Complete the FlexCard Use Tax Reversal Financial Journal available on the FlexCard webpages and submit it to Accounting Services & Controls. Full instructions are available on the webpages.