REMINDER: NEW California Use Tax Registration and Reporting Due April 15th!

As I reported back in September, 2009, California enacted new registration and reporting requirements for "qualified purchasers" to report and pay use tax directly to the Board of Equalization (BOE). The first report is due April 15, 2010. Go to CALIFORNIA for all of the details.

This new requirement is mostly impacting service providers such as law firms, medical offices, accountants, and other professionals operating in California who have not had any reason in the past to register with the California Board of Equalization for sales or use tax. Despite not being required to register or report, service providers have always had an obligation to file and pay use tax on purchases.

California has imposed these requirements to get California taxpayers to remit use tax on taxable purchasers where the seller has not charged sales tax. Tax has rarely been remitted to the state voluntarily on these types of purchases due to the difficulty in enforcing compliance.

Therefore, if you meet the conditions to be a "qualified purchaser," then you need to follow the new registration and reporting requirements or you may be subject to penalties and interest. California has automatically registered and sent “welcome letters” to approximately 180,000 individuals and businesses.

Unfortunately, it appears that California is using old records to identify "qualified purchasers." Hence, businesses that are under the $100,000 gross receipts threshold in 2009, may have been over the $100,000 threshold in prior years. Therefore, you may have received a letter to register and report. A general recommendation would be to register and report. With that said, you would not technically be a "qualified purchaser."Remember, use tax is not a new tax. Only the registration and reporting requirement is new. Therefore, if you have unreported use tax liability, it exists whether you file a report or not.

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Brian Strahle is the owner of LEVERAGE SALT, LLC where he provides state and local tax technical services to accounting firms, law firms and tax research organizations across the United States.  He also writes a weekly column in Tax Analysts State Tax Notes entitled, "The SALT Effect."  For more info, visit his website: www.leveragestateandlocaltax.com

You can reach Brian at strahle@leveragesalt.com.

Connect with Brian on LinkedIn. Follow Brian on Twitter. Join the Leverage | SALT LinkedIn Group, connect and contribute with your colleagues!  

Because state and local taxes are deceptively simple and endlessly complicated.

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