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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)

The California State Board of Equalization has issued a publication to provide details on its in-state and out-of-state voluntary disclosure programs. The publication describes what the program is, the difference between the two programs, the eligibility requirements, how to apply and the benefits of the program. In addition, the publication discusses penalty waivers and how a taxpayer can request an opinion as to whether or not the BOE would approve their voluntary disclosure request without first revealing their identity. (BOE Publication 178, Voluntary Disclosure Program, California State Board of Equalization, December 2009)

(01/06/2010)

Bill 27, which proposed to tax certain internet sales, died in the third session of the California Assembly. The bill would have amended the definition of a retailer to include any retailer who entered into an agreement with a California resident under which the resident, for a commission or other consideration, directly or indirectly refers potential customers of tangible personal property, whether by a link or an Internet Web site or otherwise, to the retailer. A similar bill, A.B. 178, was introduced on February 2, 2009 and is still pending. (A.B. 27, died at the desk, October 26, 2009; A.B. 178, introduced in the regular session by the California Assembly n February 2, 2009)

(11/23/2009)

California has issued a news release and special notice informing taxpayers that the new use tax registration and reporting law requires all "qualified purchasers" to register with the BOE and report and pay use tax. A qualified purchaser is a business that meets all of the following tests: 1) is not required to hold a seller’s permit with the BOE; 2) is not required to be registered or otherwise register with the BOE; 3) is not a holder of a use tax direct payment permit; and 4) receives at least $100,000 in gross receipts per year from business operations. The BOE has identified nearly 200,000 businesses that meet the definition of a “qualified purchaser” and is notifying them of their registration requirement. However, even if a business is not contacted by the BOE, any business that meets the requirement is still responsible for registering with the BOE to report and pay use tax. Under existing law, those businesses who do not meet the $100,000 gross receipts threshold are still required to report and pay use tax; they just do not have the mandatory obligation to register with the BOE for that purpose.

The return for 2009, along with payment, is due by April 15, 2010. The BOE is also asking businesses to report purchases for 2007 and 2008. The new provisions of this bill do not change the due date for use tax liabilities from prior years. Therefore, returns for purchases made in 2007 and 2008 were due January 31, 2008 and January 31, 2009, respectively. Penalty and interest applies to payments received after the due date of each return period. (Special Notice L-232, California State Board of Equalization, September 2009 and News Release 84-09-G, California State Board of Equalization, September 8, 2009)

(09/28/2009)

A California sales and use tax regulation discussing sales for resale has been amended to clarify the proper use of qualified resale certificate. The amendments provide that the acceptable resale designation on a purchase order is not limited to the phrase, “for resale” and may include other similar terminology. The amendments also provides that a purchase order where the applicable amount of tax is shown as $0 or is left blank will not be accepted as designating that the property is purchased for resale, unless the purchase order also includes the phrase “for resale” or other similar terminology (Reg. 1668, California State Board of Equalization, effective August 29, 2009).

(09/02/2009)

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