California Sales and Use Tax Reminders

A few reminders to businesses from the California Board of Equalization (BOE)….

  • My business purchases supplies from an out-of-state vendor who ships the property to my California business – are my purchases taxable?
    • “You Bet,” saith the BOE.  An out-of-state retailer must collect California use tax if they hold a permit or are engaged in business in California.  And if that retailer does not charge tax, you must report your purchase on your sales and use tax return and hand over the dough!
  • I give away inventory items to promote my business.  If the selling price is zero, is there any tax due?
    • “Yup.”  Giving away property is considered a use of the property and is subject to tax based on your cost, though donations to qualified charitable organizations may not be taxable.
  • Does tax apply to the sale of my business?
    • “Of course.”  Tax applies to the sale of furniture, fixtures and equipment.  Some good news:  no tax on the sale of your goodwill!  Also, if the purchaser of your business will resell your inventory, that inventory is considered a nontaxable sale for resale – procure from the buyer a resale certificate in this situation.
  • A tourist purchased merchandise in my store.  He provided proof that he will leave the state later in the week.  Is this sale exempt as a sale in interstate commerce?
    • “Nope.”  If the purchaser takes possession in California, the sale is subject to tax unless you ship or deliver the property outside of California.

Check http://www.boe.ca.gov/sutax/faqscont.htm for more answers.

And speaking of state matters, those of you who may work in more than one will

want to stay on top of the progress of H.R. 1864 (“Mobile Workforce State Income Tax Simplification Act of 2011”) as it winds its way through the Congressional maze.

Quoth Representative Hank Johnson (D-GA), one of the sponsors of this measure, “Under current law, some workers must file income tax forms for doing work in states other than where they reside or their employer is headquartered.  This hurts small businesses and individuals, especially as we recover from the recession.   Our mobile workforce legislation not only simplifies the system, but makes it uniform for people who work in multiple jurisdictions.”

The idea, here, is to establish one set of rules for withholding purposes, as well as tax return filings for nonresident workers. Since over 40 states and the District of Columbia impose personal income taxes (with varying rates and filing requirements) folks who actually do attempt to comply usually end up with a big headache.

The proposed legislation would, among other things, establish a “30 day” rule, such that work efforts in a given state for less than that number wouldn’t incur any withholding or filing requirements whatsoever!

Unless you’re a professional athlete or entertainer, that is.

CONSULT YOUR TAX ADVISOR – This article contains general information about various tax matters.  You should consult your CPA regarding the implications to your own particular situation.

Jeff Quinn, the author of this article, is a shareholder in Ashley Quinn, CPAs and Consultants, Ltd., with offices in Incline Village and Reno.  He may be reached at 831-7288, welcomes comments at jquinn@ashleyquinncpas.com, and invites readers to consider his other commentary at http://blog.nolo.com/taxes.

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