In business speak, companies are often described as having a heartbeat, although this usage is entirely metaphorical. The law too ascribes to them characteristics more properly thought of as human: They can be held liable, have a legal place of residence and must pay taxes, just like the rest of us.
The California Franchise Tax Board is seeking to enforce that last characteristic, as it has alleged that approximately 100,000 California businesses have failed to file tax returns for 2010. This is not a new initiative for the Franchise Tax Board. In 2011, businesses suspected of not filing returns ended up turning over $21 million in unpaid taxes to the state.
The first step for the Franchise Tax Board is to locate the alleged delinquent businesses. Once contacted by the state, the companies will have to respond quickly to avoid a potential tax assessment. They must show to the state's satisfaction that they had no tax liability for 2010 and therefore did not need to file a return. If they cannot do that, they must file a tax return for that year. Either option must be completed within 30 days. Otherwise, the Franchise Tax Board will assess a tax against a business based on the financial data available.
Developing a tax strategy is important for any business, but especially for businesses that call high-tax states, such as California, home. For some businesses, it may be possible to move residency to a nearby state to incur lower taxes in the future. But because California taxing authorities are often aggressive, the services of an experienced tax attorney may be helpful in resolving past and current tax disputes with the state.
Source: Los Angeles Times, "California tax collectors searching for possible 2010 scofflaws," Marc Lifsher, June 15, 2012.