The State Board of Equalization Welcomes You to the Basic Sales and Use Tax Seminar

1. The State Board of Equalization Welcomes You to theBasic Sales and Use Tax Seminar 

2. About This Presentation The following presentation is to be used only as an aid to illustrate general tax concepts, but it does not address every situation. The Revenue and Taxation Code, regulations, court decisions and other applicable laws generally control the decision making process. Throughout this presentation, you�ll find reference cites in the bottom right hand corner of the screen. They are found in the Board of Equalization�s Business Taxes Law Guide, Volume I. Please continue to contact Board of Equalization staff for a comprehensive response. You may access Sales and Use Tax information by accessing our website. Remember, your best protection is to put your inquiry in writing and ask for a written response.

3. Do I Need a Seller�s Permit?

4. How Do I Apply For a Seller�s Permit? You can download an application from our website, or contact us by mail, phone or in person.

5. What Is A Sale? Any transfer of title or possession, of tangible personal property for consideration, regardless of when payment is received.

6. Get It in Writing

7. What Is Sales Tax? Tax imposed upon the retailer (seller) for the privilege of selling tangible personal property at retail in the state of California. Retailer may be reimbursed for the sales tax by their customers. Tax due is based on the gross receipts from retail sales. It�s the responsibility of the retailer (seller) to pay sales tax to the Board of Equalization.

8. What Is Use Tax? Tax imposed on purchaser. California purchaser owes and must pay the use tax due on items purchased for use in California without payment of tax. Out-of-state retailers �engaged in business� in California must collect and pay use tax on items sold to Californians. Tax is measured by the purchase price. Remember that use tax items are supplies and/or equipment that you use in your business. Merchandise that you sell (inventory) is not a supply item.

9. When Might Use Tax Be Due? From out-of-state businesses and Purchases for your own use (not inventory). OR Inventory items purchased with a resale certificate without payment of tax and Items withdrawn from inventory for use other than resale (including use as gifts and free samples or for personal use).

10. How Do I Pay California Use Tax Due? If you have a Seller�s Permit, you must report your purchases subject to use tax on your Sales & Use Tax Return.

11. Assembly Bill 4x 18 This Assembly Bill added Section 6225 to the Revenue and Taxation Code, which now requires qualified purchasers to be registered with BOE and report and pay by April 15 the use tax owed for the previous calendar year.

12. Assembly Bill 4x 18 What is a qualified purchaser? Not required to hold a seller�s permit Not required to be registered pursuant to Section 6226 Not a holder of a use tax direct payment permit as described in Section 7051.3 Receives at least $100,000 in gross receipts from business operations per calendar year Not otherwise registered with BOE to report use tax

13. Assembly Bill 4x 18 What is use tax? Generally, a use tax liability occurs when a California consumer or business purchases tangible items for their own use from an out-of-state retailer that is not registered with that BOE to collect the California use tax.

14. Assembly Bill 4x 18 BOE will register approximately 185,000 businesses Notices will be sent by groups Effective immediately Due date is April 15 for the previous calendar year Going back 3 calendar years

15. Assembly Bill 4x 18 How will the use tax be reported? Returns will be eFiled (available March 1, 2010) Returns will be similar to the Sales and Use Tax return No Gross Sales No Deductions Login (eClient or Express Login) Payment options (eCheck, Credit Card and Paper Voucher)

16. In-State Voluntary Disclosure As of January 1, 2009, the In-State Voluntary Disclosure Program allows qualified purchasers within California, who are not otherwise required to hold a seller's permit, to report and pay their use tax liability subject to a three-year statute of limitations. Benefits: Limits the time the Board can make an assessment for prior use tax to three years. Without this program, the applicable statutory period may be extended to ten years. Allows the Board to waive late filing and late payment penalties. the math calculations are automatically done for you. Allows applicants to describe their circumstances and obtain from the Board a written opinion regarding whether the Board might approve their voluntary disclosure request.

17. How Do You Apply? Complete a BOE-38-I, Application for In-State Voluntary Disclosure, Complete a BOE-735, Request For Relief From Penalty, if applicable, and Complete a BOE-400-CSU, California Consumer Use Tax Account Application. Submit all of the above documents to your nearest Board of Equalization office. Board staff will complete your registration, mail you the appropriate tax returns for you to complete and return, and arrange for you to pay any tax, interest, or penalty due. You will be notified if you do not qualify for the voluntary disclosure program. In-State Voluntary Disclosure

18. Presumptions of the Tax Code All sales of tangible personal property are taxable unless otherwise specifically exempted. Claimed exemptions must be supported by documentation. Taxpayer is responsible for maintaining and providing documentation for potential examination.

19. Common Exemptions & Deductions Sales for Resale � Supported by resale certificate or purchase order. Food Products - Cold food sold to-go. Labor � Repair and installation. Sales to the U.S. Government � Cities and California are not US Government. Sales in Interstate and Foreign Commerce � Stream of interstate commerce. Sales Tax Included in Gross Receipts.

20. Other Exemptions & Deductions Delivery Charges - �Handling� charges typically are taxable if the sale is taxable. Bad Debts - Deductible only for previously reported taxable sales that have been written off on the business owner�s books and records. Tax-paid Purchases Resold Prior to Use � If a vendor charged tax for your inventory items. Returned Taxable Merchandise - Retailer must refund the customer�s entire sales amount including sales tax. Numerous Other Exemptions - See Publication 61, Sales and Use Taxes: Exemptions and Exclusions

21. Charitable or Nonprofit Organizations Sales to, and sales by, charitable or nonprofit organizations generally are subject to tax. A limited number of narrow exemptions are specified by statutes and regulations. You may find out more about nonprofit organizations by checking our website.

22. Required Records Records of sales including: sales invoices, cash register tapes, sales journals, etc. Records of purchases including: purchase invoices, cancelled checks, purchase journals, etc. Documentation to support claimed exemptions such as: resale certificates, exemption certificates, purchase orders, shipping documents, etc. Normal books of account. Schedules or working papers used in preparing tax returns. Records must be maintained for at least four (4) years.

23. Filing Requirements When you are issued a seller�s permit, the Board will assign you a reporting basis, based on the information you furnished. It may be: Yearly Fiscal Yearly (July 1 - June 30) Quarterly (Calendar Quarters) Quarterly Prepayment Quarterly Prepayment with EFT (Electronic Funds Transfer) A tax return (with payment) is due each period. Even if no sales are made, you must file a �0� return.

24. E-File For your convenience, the BOE accepts your sales and use tax returns and prepayments electronically. Nearly all sales and use tax accounts are eligible to e-file. Benefits of e-filing: It�s easy � the math calculations are automatically done for you. It�s convenient - file anytime, anywhere. It�s paperless � no trips to the post office, no paying for postage, no stacks of paper. It�s FREE � when you choose BOE-file.

25. Components of the Tax State Tax - currently at 7% County Tax - .25% Local Tax - 1% District Tax(es) - up to 1.50% Any city or county with applicable district taxes will have a sales and use tax rate over 8.25% Sales tax is broken down into pieces, like a pie Basic state sales tax rate is 71/4% Can be up to an additional 1 1/2% �district� taxes District taxes are voter-approved by county or sometimes city, in order to fund various local services such as transportation projects, health care issues, libraries, prisons, etc. Generally district taxes are county-wide, although some cities within the county may impose a separate district tax rate than the rest of the county EX: L.A. County District tax is 1%, City of Avalon sales are an additional 1/4%, bringing Avalon sales tax rate to 8 1/2% total.Sales tax is broken down into pieces, like a pie Basic state sales tax rate is 71/4% Can be up to an additional 1 1/2% �district� taxes District taxes are voter-approved by county or sometimes city, in order to fund various local services such as transportation projects, health care issues, libraries, prisons, etc. Generally district taxes are county-wide, although some cities within the county may impose a separate district tax rate than the rest of the county EX: L.A. County District tax is 1%, City of Avalon sales are an additional 1/4%, bringing Avalon sales tax rate to 8 1/2% total.

26. California District Taxes Where is it applicable? Any place where the sales and use tax rate is over 8.25% has applicable district taxes. For a list of counties with district taxes, download Publication 71 from the BOE Website.

27. California District Taxes When is it applicable? The retailer (seller) has a location in a district that imposes district taxes. The retailer (seller) physically enters a district that imposes district tax with their own truck to deliver an item. Salesmen physically enter a district that imposes district tax to solicit sales.

28. Other Important Factsand Responsibilities

29. Other On-line Services Available BOE Website (http://www.boe.ca.gov) On-line Verification of Seller�s Permit Numbers Enhanced Tutorial Classes & Seminars Publications Specific to Your Type of Business Frequently Asked Questions (FAQ�s) Directory of BOE Offices Board Member Biographies Tax News Credit Card Payments Useful Links to Other Websites http://www.boe.ca.gov/formspubs/index.htm � Forms & Publications Index pagehttp://www.boe.ca.gov/formspubs/index.htm � Forms & Publications Index page

30. Taxpayer Educational Consultation Program Free one-on-one assistance with a staff consultant who will review your business operation and record keeping system. You must: Be a new business (in business less than a year), Have filed at least two sales tax returns, and Be a monthly, quarterly or quarterly prepay filer.

31. Other Services Available BOE Information Center 1-800-400-7115 1-800-735- 2929 (TDD) Mon. - Fri. 8am to 5pm 24 hr. fax-back service Commonly requested forms and publications to choose from automatically faxed back to you. 24 hr voice recordings on specific topics

32. Taxpayers� Rights Advocate 1- 888-324-2798 If you have been unable to resolve a disagreement with the Board and you would like to know more about your rights under the law. http://www.boe.ca.gov/tra/tra.htm

33. We hope you enjoyedthis presentation. We wish you luck in your business venture. We welcome your comments and suggestions.