Sam Brotman August 24, 2014 5 min read

Board of Equalization - Out of State Retailers

An out of state retailer “engaged in business in this state” (California) are required to register, collect use tax on taxable sales made to consumers in California, and remit this tax to the Board of Equalization. Revenue and Taxation Code section 6203 provides that “retailer engaged in business in this state” specifically includes, but is not limited to, any of the following:

• Any retailer maintaining, occupying, or using, permanently or temporarily, directly or indirectly, or through a subsidiary, or agent, by whatever name called, an office, place of distribution, sales or sample room or place, warehouse or storage place, or other place of business.

• Any retailer having any representative, agent, salesperson, canvasser, independent contractor, or solicitor operating in this state under the authority of the retailer or its subsidiary for the purpose of selling, delivering, installing, assembling, or the taking of orders for any tangible personal property.

• As respects a lease, any retailer deriving rentals from a lease of tangible personal property situated in this state.

Clearly, maintaining of an office space or having an agent in California can lead to tax liability to the Board of Equalization for an out-of-state retailer. Section 6203 does not stop here, and mandates the following: “Any retailer entering into an agreement or agreements under which a person or persons in this state, for a commission or other consideration, directly or indirectly refer potential purchasers of tangible personal property to the retailer, whether by an Internet-based link or an Internet Web site, or otherwise, provided that certain conditions are met.” Consequently, if an out-of-state retailer, including an online retailer/store, has an agreement with California agent/contractor/marketer/advertising agent/affiliate or anyone else who refers clients to retailer's web-site, then out-of-state retailer also must register with the Board of Equalization and collect use tax on taxable sales made to consumers in California.

Section 6203 also imposes such liability to the Board of Equalization in cases when out-of-state retailer is simply a part of a larger corporate or holding group, where another member of that group is located in California and in agreement with retailer performs services in California to design and develop tangible personal property sold by retailer, or makes solicitation of sales of tangible personal property on behalf of retailer, or provides other services regarding tangible personal property to be sold by retailer.

Form BOE–1164 is usually used by auditor in the proper registration of out-of-state vendors who are engaged in business in California. A separate Form BOE–1164 is prepared for each vendor. The Board of Equalization auditor will pay attention to purchases of both small and large items. The auditor will also pay attention to sales made by sellers located in contiguous states, as BOE thinks that such sellers are likely to have significant volume of their sales in California.

Auditor will pay special attention on sales made to businesses in the food processing, entertainment, and service industries which merit special attention since these types of business may not be required to hold a seller’s permit and use tax due from such businesses may not come to the Board’s attention.


Information required to be obtained and supplied by auditor on Form BOE–1164 for out-of-state retailers includes:

a. Name and address of out-of-state retailer.

b. Name and address of sales representative.

c. Name and address of customer.

d. Invoice number.

e. Date of invoice.

f. Amount of invoice.

g. Description of property sold.

h. How sale was solicited.

i. Any other relevant information concerning seller, sales representative, scope of sales, etc.

During audits of California taxpayers, it has occasionally been noted that California use tax is being remitted to out of state vendors who are not billing the purchasers for the use tax. If the Board of Equalization auditor discovers that a taxpayer is erroneously paying use tax to an unregistered out-of-state vendor, then the auditor contacts the Board of Equalization- Out-of-State District Compliance Office, which then is responsible for further clearing of this situation.