for all our CA members

[kcjenkins]

FYI:

Use tax letters arriving (10-01-09)

The BOE is sending letters to businesses with at least $100,000 in business gross receipts who are not already registered with BOE and do not hold a seller's permit. This means all businesses, regardless of business type (including tax practices), must register.

The letters state that the BOE has identified these businesses as qualified purchasers subject to a use tax return filing requirement (even if no use tax is due). Businesses that receive the letter must complete the contact info and mail it to the BOE. The BOE will then register the business and send them an account number and log-in information so that they can e-file their returns. The 2009 returns are due April 15, 2010.

Taxpayers who did not report use tax for 2007 and 2008 must file returns to report and pay that tax. We believe this is the first step in an audit process that will continue indefinitely.

Spidell is working on a worksheet for clients to track use tax liabilities and a checklist for practitioners to easily get needed information. We will have the practice aids prepared and available at Spidell's Fall Tax Update Seminar. Register now at a location convenient to you. You may want to attend in November or December to prepare for the onslaught of requests from your clients.

[Tax Prep by Deb]

Thanks, KC. I already had a client, who I do bookkeeping and taxes for bring one in. They thought it had something to do with the corporation's taxes, and was confused by the three years that was listed on the form. I thought it was saying they had not filed their corp taxes for three years.

After reading the letter I told them what it was about and because they buy only local (in California) it really doesn't effect them with the exception of the need to fill out any reports that are sent. There is no hidden money here! Clients don't purchase anything from the Internet, so it will be a reporting requirement only.

The client felt relieved, and I get to make a little extra money!

Deb!

[jainen]

>>Clients don't purchase anything from the Internet<<

Presumably the state Board of Equalization will begin reviewing these reports, so your clients should prepare for that. Remind them to be rigorous about SEPARATE checking and credit card accounts for business and personal, set up clear records for buying supplies and new equipment, and other normal audit protection procedures. Also, since they are going to have to file use tax reports anyway, they might take a new look at Internet vendors. Use tax is the same rate as the sales tax they already pay, and in some cases product choices and discounts are VERY impressive.

[Tax Prep by Deb]

>>Clients don't purchase anything from the Internet<<

Presumably the state Board of Equalization will begin reviewing these reports, so your clients should prepare for that. Remind them to be rigorous about SEPARATE checking and credit card accounts for business and personal, set up clear records for buying supplies and new equipment, and other normal audit protection procedures. Also, since they are going to have to file use tax reports anyway, they might take a new look at Internet vendors. Use tax is the same rate as the sales tax they already pay, and in some cases product choices and discounts are VERY impressive.

Thanks Jainen,

I'm fully aware of use tax verses sales tax. Since I know all the in's and out's of this particular business I could make the above statements. They are a courier business, and with the exception of gas, purchase very little of anything else, and what they do purchase is through a literal store front. Neither of the people involved with the business would even know how to order something on-line. They are pretty good about not mixing business and personal especially when it comes to purchases. But all of these are great reminders!

Deb!