California State Tax

CDTFA Audit of Sales for Resale

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A Claimed Sale for Resale is Allowed if Supported by Valid Resale Certificate

A claimed sale for resale will be allowed in a CDTFA audit if it is supported by a resale certificate that is proper in form and is timely taken in good faith from a person who is engaged in the business of selling tangible personal property and who holds a California seller’s permit. If the purchaser is not required to hold a permit because the purchaser sells only property of a kind the retail sale of which is not taxable, e.g., food products for human consumption, or because the purchaser makes no sales in California, an appropriate notation to that effect will be entered in lieu of a seller’s permit number on the resale certificate under Regulation 1667 governing exemption certificate requirements. A certificate will be considered timely if it is taken at any time before the seller bills the purchaser for the property, or any time within the seller’s normal billing and payment cycle, or any time at or prior to delivery of the property to the purchaser. CDTFA auditors can be stringent when enforcing the resale certificate requirement.

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California Sales Tax Audits

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One of the most common targets in a California sales tax audit is sales for resale. Sales for resale is the most common deduction claimed by California taxpayers and one of the most common targets of the Board of Equalization (BOE).

Board of Equalization sales tax auditors are especially careful in examining accounting methods used by taxpayer and use various procedures to verify amounts. Often, California taxpayers will estimate this deduction and will get tripped up in a sales tax audit when the Board of Equalization auditor uses their verification procedures.

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California Employment Development Tax Settlements

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California EDD offers taxpayers tax settlement program, where EDD and taxpayer can settle a claim for less than the amount owed. EDD can settle if it evaluates costs and risks associated with the litigation of the case and determines that it is better and less expensive for EDD to settle for lower amount than to litigate in court. The Settlements Program allows an employer the opportunity to enter into a settlement agreement to also avoid the cost of prolonged litigation associated with resolving a disputed employment tax matter.

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Employment Development Department Appeals – Part 2

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For appeal taxpayer should prepare and file a pre-trial brief or memorandum of points and authorities, in which he or she must describe relevant law and apply it to his or her case in support of appeal. Taxpayer may want to locate and interview helpful witnesses, including workers previously interviewed by EDD, principals of business and management employees.

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Employment Development Department Appeals

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It is important to note that according to Unemployment Insurance Code (“UIC”) Section 1735, an officer, owner or any person in charge of affairs of any corporation, LLC or LLP, is personally liable for the amount of the contributions, withholdings, penalties, and interest unpaid by business entity, if business entity willfully fails to pay the amount. Assessments become delinquent if not paid before they become final, and subject to a penalty of 10%. UIC Section 1135. Sections 1222 and 1224 provide that assessments become final (and delinquent) after 30 days from an assessment date, or if taxpayer petitions or appeals assessment, within 30 days of an Administrative Law Judge or Appeals Board decision date. Therefore, filing an appeal generally extends time to pay tax.

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Independent Contractor Reclassification Audit

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The Employment Development Department in California has been particularly aggressive in the area of independent contractor reclassification audits. In the eyes of the Employment Development Department, California businesses have been abusing the system by treating workers who should be classified as employees as independent contractors. In doing so they shift the burden for payroll taxes onto the worker and avoid their own contributions to the payroll tax and unemployment insurance system. As a result, the Employment Development Department has been particularly vigilant in auditing businesses for perceived abused of the system. Often these independent contractor reclassification audits can be costly for businesses.

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California Bank Levy Release

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california bank levy release

When a California taxpayer fails to make proper tax payments, the Franchise Tax Board can take a number of actions against them.

One of these measures includes initiating a California bank levy against the taxpayer, which is a seizure of their assets in their bank account. The only way to prevent this is to obtain a California bank levy release.

One important thing to note is that a levy on the assets in your bank account is one method that the California Franchise Tax Board has as a means of ensuring taxpayer compliance. However, in cases where the Franchise Tax Board initiates a California bank levy, it is important to be aware of the proper tax procedure that is involved and what steps must be taken before funds are appropriated by the Franchise Tax Board.

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