California is now requiring that any SERVICE business with annual GROSS receipts of $100,000 register for for use tax.
BE CAREFUL - YOU HAVE TO REGISTER - REGARDLESS. I thought it was junk mail and threw my first notice away!
If you don't know what this is - watch out. There is now there is a 40% penalty for failure to pay it on time.
For more info see Board of Equalization Udpate
What is use tax?
This means that CPAs, atttorneys, consultants, and anyone else who provides a "service" will need to register with the California State Board of Equalization BOE.
You may owe use tax on purchases you made from out-of-state or Internet sellers.
Use tax is similar to the sales tax paid on purchases you make in California.
You may report use tax on your income tax return instead of filing a use
tax return with the State Board of Equalization. To report use tax on your
income tax return, use the Use Tax Worksheet in the tax booklet.
In general, you must pay California use tax if you purchase an item out-of-state
(for example, by telephone, over the Internet, by mail, or in person) and
- The seller does not collect California sales or use tax, and
- You use, give away, store, or consume the item in this state.
The state is looking for any business might purchase equipment, printing, etc, it other states to avoid the California sales tax. The general rule - if sales tax would have been charged if you purchased within California, then use tax applies when a similar purchase is
made from a retailer outside the state and tax is not charged. 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.
What is this new
legislation?
Assembly Bill x4-18 (Stats. 2009, Ch. 16)
added section 6225 to the Revenue and Taxation Code, which requires a
"qualified purchaser" to register with the Board of Equalization (BOE)
and report and pay use tax directly to the BOE.
A "qualified purchaser" may register for a use tax account by completing the BOE-404-A, Use Tax Registration, and mailing it to the BOE,
Board of Equalization
Tax Source Group, MIC: 007
PO Box 942879
Sacramento, Ca 94279-0007
Upon registration the person will be assigned an account number.
Beginning in September 2009 through December 31, 2009, the BOE will
mail notices to potential qualified purchasers informing them that they
will be automatically registered with the BOE unless they can prove
otherwise that they are not a qualified purchaser under Revenue and
Taxation Code section 6225. DON"T MISTAKE THIS NOTICE FOR JUNK MAIL BECAUSE YOU AREN'T IN THE BUSINESS OF SELLING PRODUCTS.
Yes. A "qualified purchaser" may register for a use tax account by completing the BOE-404-A, Use Tax Registration, and mailing it to
Board of Equalization
Tax Source Group MIC: 007
PO Box 942879
Sacramento, CA 94279-0007.
Who is a "qualified purchaser" ?
A "qualified purchaser" means a person that meets all of the following conditions:
- The person receives at least $100,000 in gross receipts from business operations per calendar year. Note: Gross receipts is the total of all receipts from both in-state and out-of-state business operations.
- The person is not required to hold a seller's permit or certificate of registration for use tax (under section 6226 of the Revenue and Taxation Code).
- The person is not a holder of a use tax direct payment permit as described in section 7051.3 of the Revenue and Taxation Code.
- The person is not otherwise registered with the BOE to report use tax.
If I'm a qualified purchaser under Revenue and Taxation Code
section 6225, but I owe no use tax because I have paid tax on all of my
purchases must I still register and file use tax returns?
Yes.
Revenue and Taxation Code section 6225 is a registration requirement,
and although you may not owe any use tax, you must be registered and
file returns.
How many prior year returns must I file as a qualified purchaser under Revenue and Taxation Code section 6225?
Although
the Revenue and Taxation Code allows the BOE to go back as far as eight
years (longer if fraud is involved), the BOE will only require returns
to be filed for purchases made in the years 2007, 2008, and 2009.
Do you have to file a return every year ?
Yes,
Revenue and Taxation Code section 6225 requires the person to be
registered on an ongoing basis, and you are required to file returns
for each calendar year your business is operating. You must still file a return even if you have no purchases to report. Simply will put zero as the amount of purchases for the calendar year in which you are reporting.
What is the due date of these returns ?
April 15th for purchases made in the previous calendar year.
What is the due date for the 2007 and 2008 years?
Since Revenue and Taxation Code section 6225 was not established until
2009, the due dates for the 2007 and 2008 returns is January 31, 2008
and January 31, 2009 respectively.
Is anything exempt?
If you purchase property outside of California, and it stays outside the state of California for 91 days, it is exempt.This does NOT include a vehicle. They have different rules.
What else should I watch for ?
If you buy a vehicle, vessel, or aircraft, outside the State of California, then the 90 day rule changes to a 12-month rule for California residents. [RTC Sec 6248(a)]. This means you can no longer go to state with lower taxes (such as Oregon) and avoid the California sales tax. If you bring the car into California within the first year, you are subject to California sales tax.
How to calculate ?
Check out following instructions and sample
