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California Individual Tax Return Requires More Use Tax Information

This article is reproduced with permission  from Spidell Publishing, Inc.

AB 1593 (Ch. 17-563) directs the California Franchise Tax Board (FTB) to revise the 2017 personal income tax returns to require that the taxpayer enter a number on the use tax line (line 91). If the taxpayer enters zero on line 91, the taxpayer must check one of two boxes indicating that either the taxpayer owes no use tax or the taxpayer has remitted his or her use tax obligation for the taxable year directly to the California Department of Tax and Fee Administration (CDTFA).

According to the FTB, tax software providers are aware of  this requirement. In most cases, the software is designed to meet the requirement so that returns are successfully filed. However, if the software does not enforce this rule, the FTB’s e-file system will not accept the return for processing and will provide an error message, for example: If Form 540, line 91 “Use Tax” is zero, then Line 91 “No use tax is owed’ or Line 91 “You paid your use tax obligation directly to CDTFA” checkbox must be checked.

California Use Tax

If a taxpayer purchased property online or out of state for which sales tax was not paid, the taxpayer must pay use tax, which is basically the same as sales tax. If the use tax had not been paid, it could be paid with the taxpayer’s California individual income tax return; or, the taxpayer can fill out a Form CDTFA-401-E, State, Local, and District Consumer Use Tax Return, and pay the tax with the completed form.

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