Nov 18, 2009 Article #45 Author: Peter S. Muffoletto, C.P.A.
With ongoing budgetary problems California has enacted a Use Tax registration requirement which applies to any business within the State of California who is defined within the act as a qualified purchaser (Sec. 6066, Revenue & Tax Code).
Effectively anyone or business that purchasers products or services subject to what would normally incur sales taxes must now self asses and pay what is commonly known as the Use Tax which is applied at the same rates as the California Sales Taxes which are dependent upon the location as to where the items or services are consumed or used.
The Use Tax is not new. The registration requirement is, therefore any purchases made that should have had sales taxes added, or purchases made from out of State sources have always been subject to the Use Tax. The new registration requirement will require all purchasers under the new registration requirement to report annually and pay for any escaped taxes.
A “qualified purchaser is defined as:
A person or business that meets all of the following conditions:
· The person or business receives at least $100,000 in gross receipts from business operations per calendar year. Gross receipts are defined within the act as the total of all receipts from both in-state and out-of-state business operations.
· The person or business is not a holder of a use tax direct payment permit.
· The person or business is not otherwise registered with the BOE to report use tax.
Any individual or business that meets these criteria is now immediately required to comply with the new use tax registration requirements. The new law does not differentiate as to type of business, therefore any person or business whether involved in services or the sale of products are required to register with the State Board of Equalization.
The new law is effective as of October 26, 2009 with reporting requirements due not later than April 15 of each year.
We are here to assist you in the registration requirements as well as the compliance with the new filing requirements. Should you need assistance in regards to this very onerous situation we suggest that you contact us directly. The State Board of Equalization has already launched an extensive audit program aimed at those that purchase goods and or qualified services who have not reported or paid the Use Tax in the past, and we are currently working with many clients who have come under this audit program. You do not want to be one of them, and our suggestion is that you contact us first before the State Board of Equalization contacts you.
Should you or your business currently holds a valid State Board of Equalization permit there is no requirement to comply with this new law relating to registration.
We believe that this registration requirement is merely the first step by the State to move towards a sales tax on all products and services as such a proposal has already been made in the State Assembly.