There are many tax rules that might puzzle us as to why they are there. One I’d like to see repealed is the use tax exemption that a California resident gets if they bring back up to $800 of taxable goods from outside of the U.S. This exemption can be used every 30 days. The goods must be hand carried back. If they ship them, they owe use tax. If they buy the same goods while traveling in Delaware (where no sales tax would have been charged), they owe California use tax.
The exemption has been around since the 1990s. It is intended to match the federal duty exemption, but it does not match it. There are several special rules in the federal exemption. Also, the purpose of a duty exemption has no relationship to why you might want to have a use tax exemption. I’m not sure why you’d ever want a use tax exemption. By use tax exemption, we mean that there is still sales tax, only if a use tax would apply, would there ever be a need for a use tax exemption.
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Original Post By: Annette Nellen
Annette Nellen, CPA, Esq., is a professor in and director of San Jose State University’s graduate tax program (MST), teaching courses in tax research, accounting methods, property transactions, state taxation, employment tax, ethics, tax policy, tax reform, and high technology tax issues.
Annette is the immediate past chair of the AICPA Individual Taxation Technical Resource Panel and a current member of the Executive Committee of the Tax Section of the California Bar. Annette is a regular contributor to the AICPA Tax Insider and Corporate Taxation Insider e-newsletters. She is the author of BNA Portfolio #533, Amortization of Intangibles.
Annette has testified before the House Ways & Means Committee, Senate Finance Committee, California Assembly Revenue & Taxation Committee, and tax reform commissions and committees on various aspects of federal and state tax reform.
Prior to joining SJSU, Annette was with Ernst & Young and the IRS.
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