Earlier this week, 500 California businesses found their names on a public list of delinquent taxpayers released by the Board of Equalization. The collective shortfall totaled $461 million.
No business wants to make this type of list. A spokesperson for the BOE said many businesses contact them to enter payment plans and remove their names. Other businesses may have filed for bankruptcy or may have ceased operations.
Any business that intends to sell or lease goods subject to sales tax in California needs to obtain a seller’s permit. This requirement even applies to temporary businesses, such as a Christmas tree lot and roadside produce sellers.
When applying for the seller’s permit, the BOE will determine the tax filing frequency – quarterly prepay, quarterly or yearly are common. The statewide sales tax is 7.5 percent. Sellers must collect this amount on each purchase and then pay it to the state.
California closely scrutinizes the sales tax system. It is important to pay taxes as quickly as possible. Even if your business cannot pay the full amount of taxes owed, filing a timely return will limit penalties. An experienced tax attorney can then help you develop a strategy that will keep your business off public lists and avoid a levy of your business assets, accounts receivable and bank accounts.
Penalties can be even more serious in some cases. A business that uses sales tax receipts to cover cash flow issues or installs sales tax suppression software (a zapper) could even face criminal tax charges. For instance, using a zapper in California can result in criminal charges with a possible sentence of three years in jail, a fine of up to $10,000 and restitution.
Source: KCRA3.com, “Top delinquent tax payers cost state of California $461 million,” Tom Miller, Sept. 1, 2015