Tax and financial advice from the Silicon Valley expert.

California sales tax relief for small businesses

Thanks to the Supreme Court’s Wayfair decision, retailers that sell tangible personal property to customers located in states where they don’t have a physical presence may be required to collect sales and use tax.  For example, a company located in Nevada that sells furniture to a California customer may be required to collect California sales and use tax and report the sale and pay the tax to California.

The same concept can require a retailer located in one sales tax district, say Santa Clara County, that sells property to a customer located in another district, say Los Angeles County, to collect and remit the sales and use tax to the district where the customer is a resident (in this example, Los Angeles County.)  (This requirement has long applied to sales of motor vehicles.)

Initially, California’s Department of Tax and Fee Administration (CDTFA) issued rules imposing this collection requirement when a taxpayer had in either the preceding or current calendar year either (1) sales into the state or district exceeding $100,000 or (2) 200 or more separate transactions.

The new requirements were proposed to be effective on April 1, 2019.

Smaller retailers complained that the requirements were too burdensome — especially because they might have 200 separate transactions with a small dollar amount.

On April 25, 2019, Governor Newsom approved Assembly Bill No. 147, which provides relief to smaller retailers.

The new threshold for the requirement to collect California state and district sales and use taxes is more than $500,000 of sales of tangible personal property to customers located in California.  (Sales of motor vehicles are still subject to the use tax reporting requirement, regardless of the amount.)

The second threshold of 200 or more separate transactions has been repealed and is disregarded.

The new $500,000 of sales threshold is retroactively effective on April 1, 2019.

A change in the new law this isn’t favorable to small businesses doing business in California is that district sales and use taxes for all districts must be collected and reported when a business reaches the $500,000 threshold for all of California.  Under the previous guidelines, reporting and collection was only required when the $100,000 or 200 transactions threshold was reached for the district.  To help get the rates that apply, the CDTFA has on online lookup tool, Find a Sales and Use Tax Rate by Address.  Here is a link to the tool. https://gis.cdtfa.ca.gov/public/maps/taxrates/  (Spidell’s California Taxletter, May, 2019, p. 3, California adopts $500,000 economic nexus threshold for use taxes.)

Retailers with a physical presence in California are still required to report and collect California sales and use tax and local district sales and use tax.  They only need to be concerned about the $500,000 threshold as it relates to sales to customers located in another district.

The new law also includes a new requirement that requires “marketplace facilitators” that sell goods for other companies on their web sites, like Amazon and EBay, to treat those sales as made by the marketplace facilitator.  The marketplace facilitator will report the sales and collect and remit the sales and use taxes when it exceeds the $500,000 of sales threshold for the State of California and the various districts.

If the marketplace facilitator reports the sale and collects and remits the sales and use tax, the retailer isn’t required to do so.

The marketplace facilitator rules won’t be effective until October 1, 2019.

Some retailers might have to report sales made through a marketplace facilitator from April 1 through September 30, 2019 and their reporting burden may be shifted to marketplace facilitators thereafter.

There may be audit issues with the new marketplace facilitator reporting requirement, because the sales reported on the sales tax report won’t agree to the books and records of the retailer and the marketplace facilitator.

Despite the complexity of the new reporting requirements, many smaller retailers will find a lot to be thankful for in this relief legislation.

What should you know about California real estate change of ownership?

The interview on Financial Insider Weekly to be broadcast in San Jose and Campbell  on Friday, July 21, is with G. Scott Haislet, CPA and attorney at law.   Our interview subject is “Real estate reassessment change of ownership in California.”  The interview will be broadcast at 9:30 p.m. Pacific Time on CreaTV, Comcast Channel 15 in San Jose and Campbell, and will be broadcast as streaming video at the same time at www.creatvsj.org. You can find broadcast times for other San Francisco Bay Area cities and past episodes at www.financialinsiderweekly.com.

What should you know about spousal and child support for a California divorce? (Part 2)

The interview on Financial Insider Weekly to be broadcast in San Jose and Campbell this Friday, February 24, is with Mark Erickson, attorney at law.   Our interview subject is “Divorce California Style – child and spousal support – part 2 of 2.”  The interview will be broadcast at 9:30 p.m. Pacific Time on CreaTV, Comcast Channel 15 in San Jose and Campbell, and will be broadcast as streaming video at the same time at www.creatvsj.org. You can find broadcast times for other San Francisco Bay Area cities and past episodes at www.financialinsiderweekly.com.

What should you know about property settlement for a California divorce?

The interview on Financial Insider Weekly to be broadcast in San Jose and Campbell on Fridays, February 3 and 10, is with Mark Erickson, attorney at law.   Our interview subject is “Divorce California Style – property settlement basics.”  The interview will be broadcast at 9:30 p.m. Pacific Time on CreaTV, Comcast Channel 15 in San Jose and Campbell, and will be broadcast as streaming video at the same time at www.creatvsj.org. You can find broadcast times for other San Francisco Bay Area cities and past episodes at www.financialinsiderweekly.com.

California extends cancellation of debt tax relief for homeowners

On July 21, 2014, Governor Brown signed AB 1391, extending California’s exclusion for cancellation of debt income for a principal residence through December 31, 2013.

Previously, the exclusion expired December 31, 2012.

This change conforms California’s exclusion effective date to the federal exclusion, which also expired on December 31, 2013. This item is one of the extenders that the U.S. Congress will consider, probably after elections are over in November, 2014.

Remember the limit for qualified indebtedness is much lower under California’s exclusion than the federal limit. It’s $800,000 for taxpayers who file joint returns, single persons, heads of households, and qualifying widows or widowers, and $400,000 for married persons or registered domestic partners who file separate returns.

The federal limit is $2,000,000 for most taxpayers and $1,000,0000 for married persons who file separate income tax returns.

California taxpayers who reported income from cancellation of indebtedness on their 2013 individual income tax returns should determine whether they can reduce their California tax by filing an amended income tax return.

What should you know about California’s real estate reassessment change of ownership rules?

This week’s interview on Financial Insider Weekly is with attorney James V. Quillinan of Hopkins & Carley. Our interview subject is "Tax planning for real estate change of ownership in California".

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Tax and financial advice from the Silicon Valley expert.