Archive for the ‘Use Tax’ Category

California Sales & Use Tax Rate Decrease Effective July 1, 2011

June 10, 2011

Effective July 1, 2011, the one percent sales and use tax rate increase that was approved with the California state budget effective April 1, 2009, will expire, lowering the overall rate from 8.25 percent to 7.25 percent.  If you live in an area where there are voter-approved district taxes, the total tax rate related to sales and purchases will be the base tax rate of 7.25 percent plus the applicable district tax.

See the California State Board of Equalization’s notice for more information:


BOE Video Provides Step-by-Step Instructions for E-Filing your Use Tax Returns

March 25, 2010

In response to the quick implementation of the new California Use Tax registration and filing requirement, the State Board of Equalization (BOE), has posted the following video on Youtube to give step-by-step e-filing instructions:

Nienow & Company, LLP clients should be receiving a detailed letter about the quickly approaching requirement, and we would be happy to assist with filing and registering.  Please contact us for further information.

Deadline for New California Use Tax Registration and Filing Requirement is Quickly Approaching

March 25, 2010

In their continued efforts to resolve the California budget crisis, the state legislature has enacted strict new Use Tax registration and filing requirements for businesses with gross income of $100,000 or more.  We want to make sure you are aware of these new requirements and some of the details of the rules and regulations.

Back in the fall of last year you may have received a letter from the California State Board of Equalization (BOE) requesting contact information so you could be registered as a use tax payer.  The letter also requested that taxpayers file returns and pay use tax that had not been paid for 2007, 2008 and 2009.  Whether taxpayers provided that information or not, the BOE registered all businesses it believes meets the $100,000 requirement, based on information they collected from the IRS.

What is and is not subject to sales and use tax can be complicated. There are numerous exceptions to the rules, but here are some common ways that people make out-of-state purchases that are subject to use tax:

· Internet purchases;

· Certain foreign purchases;

· Shopping channel purchases;

· Mail-order purchases; and

· Phone-ordered purchases.

These are some common examples of items subject to use tax:

· Machinery and equipment;

· Computers, printers and other electronic equipment;

· Office furniture and supplies;

· Computer programs shipped on a disc; and

· CDs and books.

Items that are exempt from sales tax are also exempt from use tax. Here are a few examples:

· Software that is transferred over the Internet and nothing is mailed to you;

· Newspapers, magazines, and other periodicals; and

· Purchases where the seller added California sales tax to your purchase.

If you were required to pay, and did pay, another state’s sales tax on the purchase, you may take a credit against the California use tax due.  In addition, purchases of teleproduction equipment, farm equipment, diesel fuel used in farming and food production, timber harvesting equipment and racehorse breeding stock may be exempted from use tax.

It is important to note that each business entity, of any form, meeting the $100,000 gross receipts threshold must register.  Gross receipts include among other things, gross rental income, personal service income, exempt organizations, trusts and worldwide income.

In the last month, you may have received another letter stating that the returns for 2007, 2008 and 2009 are due by April 15, 2010.  If you have not received this registration notification letter and you qualify, you must still register using Form BOE-404-A.  Under most conditions, the returns must be filed electronically on the BOE website at  Additionally, we would be happy to file your 2007, 2008 and 2009 returns for you. 

The BOE has indicated that if you are registered and do not file, they will estimate your use tax liability and send a bill after the filing deadline.  The BOE has also indicated that, although there is an eight year statute of limitations for use tax, if taxpayers file currently for 2007 and 2008, they will not go back to pursue years prior to 2007.  If you file and pay your 2009 use tax by the April 15, 2010 deadline, you will not be subject to penalties and interest, however, the BOE has stated that it will assess penalties and interest on the 2007 and 2008 returns.  As part of preparing your returns, we will also prepare and file on your behalf a request for penalty abatement on any past due use tax.

If you would like our firm to prepare your returns and penalty abatement request for you, please contact us immediately, as the April 15, 2010 deadline is quickly approaching. 

We Are Seeing the California BOE Stepping Up Collection Efforts

February 11, 2009

In what seems to be a response to the current California state budget crisis, I have seen signs that the California Board of Equalization is stepping up efforts to try to generate tax revenue. We have certainly heard that this is coming so it should not be much of a surprise, but the first reports of it hitting our clients are rolling in.

In one instance, a client of ours has had a sales tax auditor show up at their office unannounced, doing door to door examinations. This client is in a service industry, and yet the BOE felt there may be some opportunity for collection.

In what seems to be a more wide spread effort, the BOE is sending out letters requesting voluntary compliance with use tax reporting, on purchases made from out of state vendors who do not collect sales tax. If an out of state vendor is not considered to be doing business in California, they are not required to collect sales ax, but the California taxpayer IS required to report and pay use tax on those purchases. Internet sales seem to be the most prevalent example.

This is a copy of a letter received by a client of ours requesting they self-report past purchases subject to use tax.

Additionally, the BOE is apparently sending out notices to CPA’s in the state requesting that they help their clients voluntarily comply with use tax reporting. Ths is a copy of a letter we received.

Use tax reporting is required and we certainly advise all of our clients to make sure they are in compliance with the sales and use tax reporting requirements. If you have any questions about this, please do not hesitate to contact us.