Who owes the sales tax a seller failed to collect, the seller or the buyer?

Two liabilities, one tax: how the statutes are built

Every sales tax answers two questions that are easy to run together: on whom the tax is imposed, and who must collect it. A state can impose the tax on the seller and let the seller pass it on by contract, or impose it on the buyer and make the seller the collector, and states commonly pair a sales tax with a use tax on property bought without tax. Who owes uncollected tax follows from that structure, not from what the invoice said.

Three features recur in the statutes below. The seller carries a presumption that its receipts are taxable, with the burden of proving otherwise unless it holds a resale or exemption certificate, which makes the seller the first target in an audit. The buyer, where the statute places liability on it, remains liable until the tax reaches the state, and is released when it pays a seller authorized to collect and receives the proof the statute specifies. And a certificate given by the buyer moves the liability, or at least the burden, to the buyer for the transactions it covers. None of the three statutes lets a seller's failure to bill the tax shift its own liability to the buyer; the buyer's liability, where it exists, adds an obligor for the same tax rather than substituting one.

California: the retailer's sales tax and the purchaser's use tax

California's sales tax is "imposed upon all retailers" "[f]or the privilege of selling tangible personal property at retail," measured by "the gross receipts of any retailer from the sale of all tangible personal property sold at retail in this state" (Rev. and Tax. Code section 6051). The tax is the retailer's obligation. What the retailer adds to the invoice is reimbursement from the customer, and "[w]hether a retailer may add sales tax reimbursement to the sales price ... depends solely upon the terms of the agreement of sale" (Cal. Code Regs., tit. 18, section 1700(a)(1)). The statute presumes "that all gross receipts are subject to the tax until the contrary is established," and the burden of proving a sale was not at retail "is upon the person who makes the sale unless he takes from the purchaser a certificate to the effect that the property is purchased for resale" (Rev. and Tax. Code section 6091). A certificate "relieves the seller from liability for sales tax only if taken in good faith" from a person engaged in selling tangible personal property who holds a seller's permit (Rev. and Tax. Code section 6092).

On an in-state retail sale with no tax billed, then, the retailer owes the sales tax and the customer has none. Nor does the customer owe use tax on the same property: the use tax does not reach property "the gross receipts from the sale of which the purchaser establishes ... were included in the measure of the sales tax" (Rev. and Tax. Code section 6401). The burden sits with the purchaser, so a buyer audited on an untaxed invoice from a California retailer answers by showing the sale was a California retail sale within the retailer's sales tax measure, whether or not the retailer reported it.

The use tax, imposed on the storage, use or other consumption in California of property purchased from a retailer (Rev. and Tax. Code section 6201), is built the other way and falls on the purchaser: "Every person storing, using, or otherwise consuming in this state tangible personal property purchased from a retailer is liable for the tax. His or her liability is not extinguished until the tax has been paid to this state," except that a receipt from a retailer engaged in business in California, or from a retailer authorized to collect, "given to the purchaser pursuant to Section 6203, is sufficient to relieve the purchaser from further liability for the tax to which the receipt refers" (Rev. and Tax. Code section 6202(a)). The retailer engaged in business in this state must "collect the tax from the purchaser and give to the purchaser a receipt therefor" (Rev. and Tax. Code section 6203(a)), and "[t]he tax required to be collected by the retailer" "constitutes debts owed by the retailer to this state" (Rev. and Tax. Code section 6204). Property sold for delivery in California is presumed sold for use here, with the burden on the seller (Rev. and Tax. Code section 6241).

The result for an interstate sale is two obligors for one tax. The purchaser's protection is the receipt, which relieves it even if the retailer never remitted, and because its liability lasts "until the tax has been paid to this state," the statute's terms also end it when the retailer pays on audit.

When an out-of-state seller does not collect, the Department's guidance has the business purchaser pay directly, on its sales and use tax return if it holds a seller's permit, through a consumer use tax account, or on its income tax return (CDTFA Publication 123, California Businesses: How to Identify and Report California Use Tax Due (July 2026)); the income tax route is unavailable to persons required to hold a seller's permit or register, and excludes vehicles, vessels, aircraft and leases, among other items (Rev. and Tax. Code section 6452.1).

New York: a personally liable vendor and a directly liable customer

New York imposes its sales tax on "[t]he receipts from every retail sale of tangible personal property" and enumerated services (N.Y. Tax Law section 1105(a)), and places the economic burden on the customer. The person required to collect "shall collect the tax from the customer when collecting the price," and "[t]he tax shall be paid to the person required to collect it as trustee for and on account of the state" (N.Y. Tax Law section 1132(a)(1)).

The vendor's liability does not depend on collection. "[E]very person required to collect any tax imposed by this article shall be personally liable for the tax imposed, collected or required to be collected under this article" (N.Y. Tax Law section 1133(a)). Under the words "required to be collected," a vendor that never billed the tax is liable for it as fully as one that billed and kept it. The persons required to collect include "every vendor of tangible personal property or services," corporate officers, directors and employees "under a duty to act for such corporation," and "any member of a partnership or limited liability company" (N.Y. Tax Law section 1131(1)), so uncollected tax in New York is a potential personal liability for the people who run the seller, not only for the entity.

The customer's liability is stated separately. "Where any customer has failed to pay a tax imposed by this article to the person required to collect the same, then in addition to all other rights, obligations and remedies provided, such tax shall be payable by the customer directly to the tax commission and it shall be the duty of the customer to file a return with the tax commission and to pay the tax to it within twenty days of the date the tax was required to be paid" (N.Y. Tax Law section 1133(b)). The customer's liability is "in addition to" the vendor's; it arises only where the customer "failed to pay" the vendor, so a customer that paid is outside it even if the vendor never remitted; and on an in-state sale it is the sales tax itself, not a use tax, that the customer owes: New York's compensating use tax applies "[e]xcept to the extent that property or services have already been or will be subject to the sales tax" (N.Y. Tax Law section 1110(a)).

The Department's guidance to business purchasers states the same rule from the buyer's side: "When sales tax has not been collected on taxable items or services, tax is required to be paid" by the purchaser, on its sales and use tax return if it is registered, on Form ST-130, Business Purchaser's Report of Sales and Use Tax, if it is a business that is not registered and not a sole proprietor, and by the due date of the income tax return for an unregistered sole proprietor (TB-ST-910, Use Tax for Businesses (updated June 12, 2025); Instructions for Form ST-130, ST-130-I (2/25)).

Certificates move the burden in New York rather than the liability as such. Receipts are presumed taxable "until the contrary is established," with the burden of proof "upon the person required to collect tax or the customer"; "[t]he vendor shall not be required to collect tax from purchasers who furnish a resale or exemption certificate," and where one has been furnished, the burden of proving the receipt not taxable "shall be solely upon the customer" (N.Y. Tax Law section 1132(c)(1)). The library's article on New York sales tax audits of software companies covers the customer verification letters through which a vendor proves that its customers paid the tax directly.

Texas: a collection duty, a purchaser's debt and the use tax backstop

Texas imposes its sales tax "on each sale of a taxable item in this state" (Tex. Tax Code section 151.051(a)) and assigns collection to the seller, a person engaged in the business of making sales of taxable items (Tex. Tax Code section 151.008(a)). The seller "shall add the amount of the tax to the sales price, and when the amount of the tax is added: (1) it becomes a part of the sales price; (2) it is a debt of the purchaser to the seller until paid; and (3) if unpaid, it is recoverable at law in the same manner as the original sales price" (Tex. Tax Code section 151.052(a)). The seller's exposure comes from the presumption: "all gross receipts of a seller are presumed to have been subject to the sales tax unless a properly completed resale or exemption certificate is accepted by the seller," and a sale is exempt only if the seller receives the certificate "in good faith" (Tex. Tax Code section 151.054(a) to (c)). A seller that made a taxable sale without collecting, and without a certificate, carries tax on the receipt.

The purchaser's liability runs through the use tax. "The person storing, using, or consuming a taxable item in this state is liable for the tax imposed by Section 151.101 of this code, and ... the liability continues until the tax is paid to the state" (Tex. Tax Code section 151.102(a)). The person "is not further liable" if it "pays the tax to a retailer engaged in business in this state or other person authorized by the comptroller to collect the tax and receives from the retailer or other person a purchaser's receipt" (Tex. Tax Code section 151.102(b)), and a retailer engaged in business in Texas that sells for use in the state "shall collect the use tax that is due from the purchaser and give the purchaser a receipt for the tax payment" (Tex. Tax Code section 151.103(a)). The Comptroller's guidance confirms that this reaches a seller's failure to charge, not only sales from outside the state: "If the seller does not have a permit or fails to charge sales and use tax, the purchaser must pay the use tax directly," a permitted purchaser reporting the tax on its sales and use tax return and a purchaser without a permit filing Form 01-156, Texas Use Tax Return (Texas Comptroller of Public Accounts, Use Tax, read October 14, 2026).

Texas also states the buyer's liability for a misused certificate. A purchaser that gives a resale certificate and then uses the item other than for retention, demonstration or display "shall be liable for payment of the sales tax on the value of the taxable item" for the period of that use (Tex. Tax Code section 151.154(a)), and a purchaser that gives an exemption certificate and uses the item in a nonqualifying way is liable in the same manner (Tex. Tax Code section 151.155(a)).

One untaxed sale under three statutes

A distributor of commercial kitchen equipment sells a set of freestanding ranges, fryers and prep tables to a restaurant group for use in the group's own kitchens. The sales representative understood the buyer to be exempt, the invoice shows no tax, and no certificate is in the file. The distributor is audited two years later.

If the distributor is a California retailer delivering in California, it owes the sales tax, and the restaurant group owes the state nothing on the sale (Rev. and Tax. Code sections 6051, 6091, 6401). If the distributor is outside California but engaged in business here and ships the equipment in, the distributor owes the use tax it was required to collect and the group owes the same tax until someone pays it to the state. In New York, the distributor and, potentially, its officers and employees under a duty to act are liable for the tax "required to be collected," and the group owes it directly (N.Y. Tax Law sections 1131(1), 1133). In Texas, the distributor carries the tax on a receipt presumed taxable, and the group owes use tax until the tax is paid to the state.

The group's position would have been different had it paid the tax on the invoice: in California and Texas, payment to a retailer engaged in business in the state, with the receipt, relieves the purchaser (Rev. and Tax. Code section 6202(a); Tex. Tax Code section 151.102(b)), and in New York the customer's direct liability arises only where it "failed to pay" the vendor. Had the group instead given a resale certificate that proved wrong, the distributor that accepted it in good faith would have been protected and the liability would have rested with the group (Rev. and Tax. Code sections 6092, 6094(a); N.Y. Tax Law section 1132(c)(1); Tex. Tax Code sections 151.054(b), 151.154(a)).

Recovering the tax from the buyer, and the questions the statutes leave open

In California, the sales tax is the retailer's, and reimbursement from the customer is a matter of contract. Regulation 1700 presumes the parties agreed to reimbursement where "[t]he agreement of sale expressly provides for such addition of sales tax reimbursement," where reimbursement "is shown on the sales check or other proof of sale," or where the retailer posts a notice that reimbursement will be added (Cal. Code Regs., tit. 18, section 1700(a)(2)). A seller whose contract provides that the buyer bears sales tax has a contractual claim; a seller whose invoice showed no tax and whose contract is silent faces the regulation's premise that reimbursement depends "solely upon the terms of the agreement of sale" (section 1700(a)(1)). On a use tax transaction the position differs, because the purchaser is itself liable to the state until the tax is paid, but the retailer's recovery from the purchaser is still a private claim, and none of the sections discussed here supplies one.

New York gives the vendor a statutory right: a person required to collect has "the same right in respect to collecting the tax from their customer or in respect to nonpayment of the tax by the customer as if the tax were a part of the purchase price," and the tax commission must be joined as a party in any action to collect it (N.Y. Tax Law section 1133(a)). The practical alternative is proof that the customer paid the tax directly, which takes the sale out of the vendor's assessment.

Texas also supplies a statutory remedy. When the tax is added to the sales price, it "is a debt of the purchaser to the seller until paid" and "if unpaid, it is recoverable at law in the same manner as the original sales price" (Tex. Tax Code section 151.052(a)(2), (3); see section 151.103(a)(2), (3) for use tax). The open question is the trigger. The debt and the right of recovery attach "when the amount of the tax is added," and a seller that never added the tax to the invoice is not plainly within that language. Whether section 151.052(a) supports a seller's suit for tax it failed to bill, or only for tax it billed and the purchaser did not pay, is a question the text raises and does not resolve; the contract is the safer ground.

Two further questions are open in all three states. Where both parties are liable, none of the statutes discussed here sets an order of collection, and none of the guidance read for this article says how the agency chooses whom to assess. And none says what becomes of the buyer's liability when the seller pays only part of an assessment, for example in a settlement; the California and Texas texts release the buyer on payment of "the tax" to the state, which suggests exposure for any unpaid balance, but neither agency has published a position.

Practice notes

For a seller, the uncollected tax is its own liability in all three states, and the defenses are documentary: a certificate accepted in good faith at the time of sale, or proof that the buyer paid the tax to the state. The second is worth pursuing wherever the customers are businesses, because each payment proved removes a sale from the assessment. Officers and employees of a New York vendor with a duty to act for it carry personal exposure under section 1131(1), which makes uncollected tax a governance matter as well as a compliance matter. For a buyer, an untaxed invoice is not a saving. In New York and Texas, and on a California use tax transaction, the buyer owes the tax until it reaches the state, and the sound course for a buyer that receives an untaxed invoice for a taxable purchase is to accrue and report the tax itself on the return the guidance prescribes. A California buyer of property sold and delivered in California by a California retailer is in a different position, and its file is best kept with the evidence that the sale was a California retail sale. For both sides, the contract's tax clause is the surest basis for a seller that pays an assessment to recover from its buyer, and a clause that allocates sales and use tax to the buyer expressly is the only recovery route that does not depend on how a court reads a collection statute. G&G State Tax Group provides sales and use tax audit defense, purchaser use tax reviews and contract tax clause analysis alongside its state and local tax practice.