Importing goods into California adds several layers of bookkeeping that domestic-only businesses don’t deal with. Missing any of them can lead to unexpected tax bills, penalties, or problems during an audit.

Customs duties are the first thing to track. Every product you import has a harmonized tariff code (HTS code) that determines the duty rate. Record the duty amount for each shipment as part of your landed cost, not as a separate general expense. If you lump duties into a vague “shipping” or “miscellaneous” category, your cost of goods sold will be wrong and your margins will look different than they actually are. Your customs broker provides entry summaries with this detail. Keep those documents organized by shipment.

Use tax is where many importers get tripped up. When you bring goods into California and no sales tax was collected at the point of purchase or entry, you owe California use tax on those goods. The rate matches your local sales tax rate. You report and pay this through the California Department of Tax and Fee Administration (CDTFA), either on your sales tax return if you already have a seller’s permit or on a separate use tax return. This isn’t optional. The CDTFA cross-references import data with Customs and Border Protection records, so they know what’s coming into the state.

Bond costs are another line item to track. Customs bonds are required for commercial imports and need to be recorded as a business expense. If you import frequently, you likely have a continuous bond that renews annually. Record the premium when paid and don’t forget to account for it in your overall import cost analysis.

If you’re selling wholesale within California, you must collect and remit sales tax unless your buyer provides a valid resale certificate. This is where record-keeping becomes critical for audit protection. Maintain a file of every resale certificate you receive, organized by customer. If the CDTFA audits you and you can’t produce a valid certificate for a tax-exempt sale, you’ll owe the sales tax yourself plus penalties and interest. Review certificates periodically to make sure they haven’t expired or that the buyer’s permit is still active.

Your chart of accounts should reflect these realities. Set up separate accounts or sub-accounts for customs duties, use tax payable, bond expenses, and freight and insurance on imports. This makes CDTFA filings straightforward and gives you a clear picture of your true landed cost per product.

Tracking all of this consistently is what separates importers who know their real margins from those who are guessing. If you’re bringing goods into California and your books don’t reflect duties, use tax, and landed costs accurately, reach out to our Orange County small business bookkeeping services team. We have hands-on experience with import and distribution accounting and can help you get your systems set up correctly from the start.