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New California tax requirement
travelin cat




msg:3983549
 7:39 pm on Sep 3, 2009 (gmt 0)

The State of California feels that many businesses purchase supplies and equipment from out of state (computers, mostly) and they are missing out on the sales tax that would have been charged if the merchandise was purchased from a retail store in California.

So, new regulations have come in to play specifically a requirement to file a new form (BOE-400-CSC) and file a sales tax return (Form BOE-401EZ) by 4/15/10 to report your 2009 purchases that did not have sales taxes charged.

The State Board of Equalization has more here:

[boe.ca.gov...]

Here are some details from their FAQ [boe.ca.gov]:

What type of merchandise is subject to use tax?

Generally, the same types of items that are subject to sales tax are subject to use tax. Sales and use tax applies to the sale or use of tangible personal property in California. Section 6016 of the Revenue and Taxation Code defines tangible personal property as "personal property which may be seen, weighed, measured, felt, or touched, or which is in any other manner perceptible to the senses."

What is the rate for California use tax? What is the rate for my city?

The sales tax and use tax rates are the same. The rate of use tax is determined by where the property will be used, stored or consumed, regardless of where the sale takes place.

What is the difference between sales tax and use tax?

The California sales tax is imposed on all California retailers. It applies to all retail sales of tangible personal property in the state. Retailers making sales in the State of California are required to remit the sales tax to the Board of Equalization.

The California use tax is imposed on consumers of tangible personal property that is used, consumed, or stored in this state. Use tax applies to purchases from out-of-state vendors that are not required to collect tax on their sales. Use tax also applies to most leases of tangible personal property.

This doesn't mean that everything you pay for is reportable. Services you pay for are excluded as are downloads of computer software. But, for example let's say you buy your anti-virus program over the Internet and download the software onto your computer--not taxable. But, if they send you the CD as well, the entire transaction is taxable. Basically, if you can hold it in your hand then use tax is due.

 

LifeinAsia




msg:3983618
 9:04 pm on Sep 3, 2009 (gmt 0)

The requirement to report (and pay) use tax on out of state purchases is nothing new- the law's been around since 1935.

Note: Form BOE-400-CSC is for businesses OUTSIDE of California that collect tax on purchases made by Californians.

Since California has (so far) been unable to pass an "Amazon tax" to pass on responsibility to retailers to do their work for them, the BOE is apparently continuing to step up efforts to enforce the laws on the books that they've been mostly lax in enforcing.

fargo1999




msg:3984146
 5:33 pm on Sep 4, 2009 (gmt 0)

If the state of California (or any other state) feels that many buyers purchase stuff from out of state then they should lower business taxes in California so that businesses have a reason to be located in California.

signor_john




msg:3984189
 5:59 pm on Sep 4, 2009 (gmt 0)

If the state of California (or any other state) feels that many buyers purchase stuff from out of state then they should lower business taxes in California so that businesses have a reason to be located in California.

Or maybe they should convince the other states to raise their taxes.

LifeinAsia




msg:3984202
 6:05 pm on Sep 4, 2009 (gmt 0)

Great- all the states raise (or start imposing) their sales taxes, and everyone moves out of the U.S.

Rugles




msg:3984215
 6:20 pm on Sep 4, 2009 (gmt 0)

Generally, the same types of items that are subject to sales tax are subject to use tax.

So, does this mean any hard goods we ship Cali falls under this law.

Can anyone clarify which goods (other than the software example) will fall under this law?

We ship a lot of stuff to Cali, yikes!

travelin cat




msg:3984222
 6:26 pm on Sep 4, 2009 (gmt 0)

Rugles, the FAQ (http://www.boe.ca.gov/sutax/faqusetax.htm) states in the second paragraph of the first item:

A list of items the sale of which are not subject to sales or use tax can be found in Publication 61 Sales and Use Taxes: Exemptions and Exclusions.

There is a pdf there and a phone number

Rugles




msg:3984235
 6:43 pm on Sep 4, 2009 (gmt 0)

Thanks,

They keep mentioning "out of State", does that mean "out of country" is exempt?

travelin cat




msg:3984246
 7:05 pm on Sep 4, 2009 (gmt 0)

There is a lot of stuff in the previously mentioned Publication 61, including this:

SECTIONS: 6006.5 and 6367 -
PURCHASES IN FOREIGN COUNTRIES The first four hundred dollars ($400) purchase price of tangible property purchased in a foreign country by an individual and personally hand carried into this state from the foreign country within any 30-day period is exempt from the use tax.

You may wish to have one of your tax guys look closely at the publication.

john_k




msg:3984263
 7:36 pm on Sep 4, 2009 (gmt 0)

First - I am not a tax attorney or tax accountant. So this is for general info only - Don't rely on this to make your own tax decisions.
-----------------------------------

As another poster stated, this is not new and is a requirement in all/most states that have a sales tax. If you purchase something to use (not to resell and not to consume in the manufacturing of something you sell) then the purchase is subject to sales & usage tax. If you don't pay sales tax on it when you buy it, then you are supposed to pay usage tax on it.

Generally usage tax is equal to the sales tax you would pay for local purchases. This applies to businesses as well as private/individual taxpayers.

Example 1: You live in California and order a widget from Chicago. The seller does NOT charge Illinois + Cook County sales tax. You are liable to pay usage tax to the state of California. If you bought it for your business, then the business owes the tax. If you bought it for personal use, then you owe the tax.

Example 2: You live in California and order a wonket from Ohio. The total paid DOES INCLUDE Ohio sales tax. You do not owe sales or usage tax to California.

Example 3: You live in California and buy 100 widgets from New York to resell on your web site. You were not charged sales tax when you purchased them. You do not owe usage tax because you are reselling them and not using them yourself.

Example 4: Still in California, you buy 1000 screws from the local Fastenal for use in making a widget that you sell. You should have a state tax id. Fill out a tax-exempt form to give to Fastenal so that you do not pay state sales tax. You do not owe usage tax either.

Example 5: You haven't moved. You buy 2000 washers from Missouri. These are also to be used to make the widget you sell. You did not give the seller a CA state tax id and you were NOT charged sales tax when you bought them. You do not owe usage tax because it is a component of the item you are selling.

travelin cat




msg:3984271
 7:51 pm on Sep 4, 2009 (gmt 0)

It is true that these regs have been on the book for over 70 years. What is new is the requirement to complete a form and file a specialized tax return.

I'm trying to see if I can track down which people/businesses are required to fill out the new form. My CPA has told me of my eligibility, but I am unable to verify what makes a person or entity eligible at this time.

Marcia




msg:3984305
 8:19 pm on Sep 4, 2009 (gmt 0)

Or maybe they should convince the other states to raise their taxes.

Las Vegas/Nevada has been blasting very well done commercials here on Los Angeles cable stations about being business friendly.

LifeinAsia




msg:3984318
 8:28 pm on Sep 4, 2009 (gmt 0)

Where are you seeing that all businesses are now required to file that form?

travelin cat




msg:3984345
 8:48 pm on Sep 4, 2009 (gmt 0)

LifeinAsia, I never said everyone had to file. I said that my CPA told me we have to and that I was trying to track down what the requirements were to file.

kartiksh




msg:3984542
 5:42 am on Sep 5, 2009 (gmt 0)

One more reason to support my desire to move our business out of California.

ogletree




msg:3984553
 6:14 am on Sep 5, 2009 (gmt 0)

So it would seem that you would wan't to buy something from a state that charges less sales tax so you don't have to pay the high CA tax.

tangor




msg:3984578
 6:57 am on Sep 5, 2009 (gmt 0)

Guys and gals... most States in USA have similar laws. Texas does, for example. The question is how to enforce it? If you are a business the government can find you via your business filings etc...and come into your offices and do an inventory IF you have not declared these purchases. What CA (and other States) are attempting to do is scare the consumer public into compliance... and that is not going to happen. Another tempest in a teapot.

ogletree




msg:3984895
 11:11 pm on Sep 5, 2009 (gmt 0)

They need to set up a way for people to report companies like they do with software licenses. Then when people get fired they go turn the company in.

Leosghost




msg:3984936
 12:04 am on Sep 6, 2009 (gmt 0)

Purchases in foreign countries has been mentioned ..but purchases from foreign countries ? ( presumably we are not required to charge Cali' tax ..and that any taxation will be done by US customs upon entry of goods to USA ..if the destination is California ? ) ..And if the customer wants shipping to say Florida but billing to California ..then what ?

greenleaves




msg:3984958
 12:37 am on Sep 6, 2009 (gmt 0)

Purchases in foreign countries has been mentioned ..but purchases from foreign countries ? ( presumably we are not required to charge Cali' tax ..and that any taxation will be done by US customs upon entry of goods to USA ..if the destination is California ? ) ..And if the customer wants shipping to say Florida but billing to California ..then what ?

An answer from an asset allocation specialist would likely be neither... a answer from a politician would be both :P

piatkow




msg:3985162
 5:53 pm on Sep 6, 2009 (gmt 0)

The answer of course is to have a single national taxation system.

nickreynolds




msg:3985171
 6:26 pm on Sep 6, 2009 (gmt 0)

"The answer of course is to have a single national taxation system."

Well at last I've found something good about our UK tax system

MatthewHSE




msg:3985531
 2:03 pm on Sep 7, 2009 (gmt 0)

As others have said, use tax is nothing new. If I'm reading this correctly, this doesn't mean anything to vendors, only to businesses who purchase items from outside of California and do not pay sales tax to the vendor's state. I believe most (all?) states have a use tax, although it's virtually unknown and rarely enforced.

The answer of course is to have a single national taxation system.
I hope you're joking about that - the last thing we need is yet more centralization.

Robert Charlton




msg:3986839
 7:20 pm on Sep 9, 2009 (gmt 0)

This is the new part....
So, new regulations have come in to play specifically a requirement to file a new form (BOE-400-CSC) and file a sales tax return (Form BOE-401EZ) by 4/15/10 to report your 2009 purchases that did not have sales taxes charged.

I had a meeting with my accountant in early August in which I specifically brought up the subject of use tax, as it's been clear to me that California governments are so hurting for funds that they're going to go after every opportunity to nail you. At the time of the meeting, she told me that unless I was selling merchandise, I had no requirements to file any forms with the BOE... and therefore would encounter no use tax reporting form.

If the reporting requirements have changed, this is a matter of concern. One simply does not want to cross the California State Board of Equalization. I have seen them effectively put companies out of business by retroactive audits that tied them up forever. BOE reporting forms (of sales tax collected), eg, require county by county itemization, among the most byzantine forms I've ever seen. (I for one would welcome more centralization in this case).

Among their penalties I've seen in the past... possibly not applicable here, but there is a parallel... if you had a resellers permit and used that to avoid paying sales tax on certain items, they would change your status from a non-taxable service company to a company on which all transactions were taxable. I don't know what they'd do regarding use tax, but I'd really rather not fool with them.

The question here is what is the threshold for filing the new form? I can't find anything specific on their website.

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