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The California State Board of Equalization (BOE) has notified more than 180,000 taxpayers that they are required to register with the BOE under a new law in order to report and pay their use tax liability for purchases subject to use tax for the previous calendar year. On April 1, 2010 the BOE issued a news release reminding taxpayers required to register, to a file a return and remit the use tax due directly to the BOE on or before April 15, 2010. However, at its March Board Meeting, the Board directed staff to make it clear to taxpayers that they may request relief from penalty or an extension. In response, forms for both requests have been placed on the home page of the BOE website and other locations for the taxpayer, including form BOE-735, Request for Relief of Penalty.

The new registration requirement applies to taxpayers operating service businesses that are either an individual, partnership, corporation, or other business entity that meets all of the following conditions: 1) the business receives at least $100,000 in gross receipts from business operations, both in-state and out-of state, per calendar year; 2) the business is not required to hold a seller’s permit or certificate of registration for use tax; 3) the business is not a holder of a use tax direct payment permit; and 4) the business is not otherwise registered with the BOE to report use tax.

Qualified purchasers who have not received a letter from the BOE are still obligated to comply with the new law and register and file use tax returns by April 15. Following registration, taxpayers will be furnished with their account number and express login code. Taxpayers registering in BOE field offices can immediately file their returns at efiling kiosks in each office. Three payment options are available while efiling: 1) electronic payment through ACH Debit (eCheck); 2) Credit Card; or 3) Paper Check. Additional rules and regulations apply. (News Release 41-10-Y, California State Board of Equalization, April 1, 2010)

(04/08/2010)

The California State Board of Equalization (BOE) has updated guidance regarding its Offer in Compromise Program for the taxes and fees it administers. An offer in compromise is a proposal to pay BOE an amount that is less than the full tax or fee liability due. If the taxpayer makes an offer and the BOE accepts it, the taxpayer will no longer be liable for the full amount due and the BOE will release any related tax liens as provided by the terms and conditions relative to the taxpayer’s offer. The Offer in Compromise Program provides a payment alternative for both individuals and businesses that cannot pay their tax or fee liability in full. The updated publication provides information on application, procedure, and evaluation of offers made. (BOE Publication 56, Offer in Compromise, California State Board of Equalization, March 2010)

(04/05/2010)

California legislation enacted in 2009 that imposes registration requirements on qualified purchasers for use tax purposes has been added to Regulation 1699, Permits. Clarification that the provisions refer to seller’s permits has also been added to the regulation. (Regulation 1699, California State Board of Equalization, effective March 17, 2010)

(03/15/2010)

The California State Board of Equalization (BOE) has amended its rule on approvals required for certain dollar amount refunds. If a Board staff Decision and Recommendation or Supplemental Decision and Recommendation determines a refund in excess of $100,000 (previously $50,000) should be granted or denied, the recommendation must be submitted to the Board for approval. Proposed determinations to grant refund claims for duplicate or erroneous payments made through the electronic funds transfer program in excess of $100,000 must be submitted to the Executive Director for approval.

If a Board staff decision recommends an amount exceeding $50,000 for refund, credit or cancellation and the recommendation does not require Board approval, the proposed determination to refund, credit, or cancel such amount must be available as a public record for at least 10 days prior to its effective date. If a Board staff decision recommends an amount exceeding $15,000, which was determined pursuant to the Integrated Waste Management Fee Law, be canceled and the recommendation does not require Board approval, the proposed determination to cancel such amount must be available as a public record for at least 10 days prior to its effective date. (Regulations 5237 and 5266, California State Board of Equalization, effective February 19, 2010)

(03/01/2010)

The California State Board of Equalization has revised its publication on gift-wrapping charges to include the taxability of gift packages with a combination of food and nonfood items. Gift packages that contain only food, such as cheese, crackers, or fruit, are generally exempt from tax. However, it may be necessary to determine the taxable portion of a package if nonfood products are included in the gift basket.

For “combined” packages where records verify the cost of the individual items in the package and the retail price of the nonfood product is more than 10 percent of the retail value of the entire package, not including the container, you must separate the retail value of the nonfood products. The tax should be based on the retail sales price of the nonfood products, not including the value of the container. On the other hand, if you do not have records to verify the cost of the individual items (combination package preassembled from your supplier) and the retail value of the nonfood product exceeds 10 percent of the retail price of the entire package, not including the container, you must calculate the tax based on the retail sales price of the entire package, including the value of the container. The sales price of a combination package is nontaxable if the retail value of the nonfood products is 10 percent or less than the total value of the contents (not including the container) and the container's retail value is 50 percent or less of the entire package value.

Generally sales tax does not apply to gift-wrapping charges for products sold in a nontaxable transaction. However, if you gift-wrap items that you did not sell or items that are taxable, all of your gift-wrapping charges—including charges for labor—are taxable. Certain gift-wrapping supplies like wrapping paper, tape, gift boxes, and tissue may be purchased using a resale certificate if they become a physical part of the packages you wrap. (BOE Publication 106, Combination Packages and Gift-Wrapping, California State Board of Equalization, December 2009)

(02/05/2010)

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