According to an article in the February 18th San Francisco Chronicle, every business with gross receipts over $100,000 has to register with the Board of Equalization by obtaining a use tax account by April 15th, even though the business is not required to hold a seller’s permit or certificate of registration for use tax. The law came into effect in July 2009, but they had no money to advertise the fact so it may come as a surprise to many self-employed consultants like us!
According to the Board of Equalization, you must obtain a use tax account if you meet all of the following conditions:
- Receive at least $100,000 in gross receipts from business operations per calendar year. Note: Gross receipts are the total of all receipts from both in-state and out-of-state business operations
- Are not required to hold a seller’s permit or certificate of registration for use tax (under section 6226 of the Revenue and Taxation Code)
- Are not a holder of a use tax direct payment permit as described in section 7051.3 of the Revenue and Taxation Code
- Are not otherwise registered with the BOE to report use tax
This is to collect use taxes on supplies purchased out of state (usually over the Internet). Since 1930, it’s been up to the business and individual to pay use tax on items purchased out of state even though the vendor does not charge you sales tax.
They are requiring that businesses go back three years (2007-2009) and pay any use taxes that they neglected to pay for those years. However, there may be a penalty for the late 2007 and 2008 taxes and an investigation if the Board feels that there was intent to defraud.
For more info:
- SF Chron article: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/02/18/BUVQ1C33I3.DTL
- BOE FAQs: http://boe.ca.gov/sutax/useTaxRegFAQ.htm#usetax31
- BOE Registration: http://www.boe.ca.gov/info/reg.htm (I was told I had to fill out form BOE-404-A Use Tax Registration and mail it into the local field office).
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