California Use Tax
Registration & Tax Return Filing
Why Your Company is Now Required to File a
Sales & Use Tax Return
Update: The SBE has announced that if a company files 3 consecutive "zero returns," it will automatically be taken off the list of companies required to file. If this applies to your company, you should have received a letter in October, 2011.
Burlingame - San Mateo - Foster City CPA Since '88
Don't miss
important tax news and
due date reminders!
or
(We won't share)
Answers to many of your tax questions can be found here
If you have a tax question that you think other people would be interested in, send it to me. If I use it in my Tax News Blog or on my General Tax Info Page,I'll send you a Starbucks card!
California is desperate for tax revenue, so it has begun to enforce a law that's been on the books for decades.
When a California person or business buys anything without paying sales tax, you have always been required to report the purchase and pay use tax.
The new enforcement push is on businesses because we tend to buy significant amounts of supplies and equipment, sometimes from out-of-state (internet) or second hand.
Do I Have to File a Use Tax Return?
All businesses with annual gross receipts of at least $100,000 are required to file annual use tax returns with the SBE, even if you sell only services, no physical product. This impacts all types of businesses: corporations, LLCs, sole proprietors / self-employed, nonprofits, and even rental property owners.
Once your business has sales of $100,000 in one year, you are required to file the use tax return every year thereafter until the business is dissolved.
If you already file sales tax returns, your only change will be to make sure that you enter either an amount or a zero on the use tax line of your sales tax return. No separate return is required.
If you are a sole proprietor or a rental property owner, you may choose to report both your business and personal use tax on the use tax return. But you may not do the opposite -- report your business use tax on your personal tax return.
If the SBE identifies you as a business which did not file but should have, they will estimate what you owe and send you a bill for the tax plus 10%. To avoid penalties and also probably lower the amount you owe, it is best to file before they contact you. As of 5 months ago, 83% of the returns filed showed no tax due.
What Do I Do First?
You will need an i.d. number in order to file a use tax return. To register, fill out Form BOE-404-A. Fax or mail the form to your nearest BOE office.
Use tax returns must be filed electronically. If you have any paperwork from the SBE, it will show your account number and express login code. Otherwise, call (800) 400-7115 to get this information.
When Do I File the Use Tax Return?
The tax return for 2010 is due on 4/18/11, even if your company is a fiscal-year taxpayer. If you registered in 2010, you must file returns for 2008 and 2009 also, even if those returns show zero tax due.
How Do I Pay the Tax?
As part of the e-filing process, you will be given an opportunity to pay by e-check, or you can print out a voucher to mail with a regular check. Be sure to write your BOE account number on the check. You may also pay by credit card.
If you filed late, owed tax, and were assessed a penalty, file Form BOE-735 to request abatement. So far, all requests for abatement of penalties have been granted.
Many of my clients (corporations, LLCs, self-employed, rental property owners) have me prepare their use tax returns as part of preparing their income tax returns. This is very efficient, since I am already looking at information about purchases of supplies and equipment.
If you have questions / concerns about your use tax, especially if you are considering a large transaction, consider consulting an experienced CPA.
Bess Kane, CPA
January, 2012
