The California Department of Tax and Fee Administration (CDTFA) is a relatively new agency, forming in 2017 under the Taxpayer Transparency and Fairness Act. The purpose of the CDTFA is to administer various California taxes, including alcoholic beverage taxes, cannabis taxes, fuel taxes, taxes on insurers, and – most notably for the purposes of this article – sales taxes. Like the IRS and other tax agencies, the CDTFA periodically audits taxpayers – sometimes at random, but more often, because the taxpayer’s records indicate some sort of anomaly or problem (such as inaccurate or unfiled returns). Fortunately for taxpayers, the CDTFA has adopted policies enabling businesses to dispute CDTFA audit findings, such as determinations that delinquent sales taxes are due and owing. Recently, the CDTFA issued updated guidance on protocols and procedures for disputing, or “appealing,” CDTFA determinations, which our California sales tax audit attorneys will review in this article. If you disagree with a CDTFA finding and wish to file an appeal, read on to learn the basics about the California tax appeals process – and be sure to consult with an experienced CDTFA audit lawyer for assistance.
In the interest of brevity, the instructions contained in this article are necessarily condensed from the original report (CDTFA Publication 17), which readers may view in full here. For additional information, readers may refer to the CDTFA Sales and Use Tax page, browse our sales tax FAQ archives, or simply contact our offices to speak confidentially with a CDTFA lawyer regarding any sales tax issue.
If the CDTFA determines that you owe additional taxes or penalties, you will receive a letter called a “Notice of Determination” displaying the amount owed. To dispute the Notice of Determination, you must file what is called a “petition for redetermination” within 30 days of the date on the notice.
It is crucial to meet the 30-day deadline, after which time “your liability will be final and will be due and payable.” In such a scenario, the only way to proceed is to pay the amount due, then seek a refund by filing a refund claim. Needless to say, it is more efficient simply to meet the deadline and proceed ahead to step two: the appeals conference.
The contents of the petition must meet specific criteria set by the CDTFA. Though all criteria must be satisfied, the most important is your ability to provide a clear, detailed, and factual basis for your disagreement. The petition may be filed online, sent via fax, or mailed.
Your petition for redetermination will be reviewed by the Business Tax and Fee Division (BTFD), which will issue a decision to you. If you disagree with the decision, you must request an appeals conference within 30 days. “Otherwise… a Notice of Redetermination will be issued to you based on BTFD’s conclusions,” Publication 17 explains, “and your appeal will end.”
At the appeals conference (which may be recorded at your request), which is “an informal discussion of relevant facts and applicable law concerning your appeal,” the Appeals Bureau will review any evidence and information you present, providing it meets certain standards. However, the BTFD will also be permitted to argue its case against you, making skilled representation essential.
After reviewing both sides’ arguments and evidence, the Appeals Bureau will issue a decision in writing. Your appeal may be totally granted, totally denied, or partially granted, depending on the Appeals Bureau’s findings.
If you disagree with the Appeal Bureau’s decision, there are two basic courses of action you may choose to take:
Though the CDTFA makes efforts to provide clear instructions for taxpayers, it is not recommended to attempt handling an appeal without professional tax representation. It is in your best interests to consult an experienced California tax audit attorney before filing an appeal or petition for redetermination, due to the legal and financial complexity that is involved. As the CDTFA cautions taxpayers, “An appeal can be referred back to a prior step. As a result, you may go through some steps in the appeals process more than once.” Working with a tax attorney streamlines and facilitates the process, making appeals more efficient while increasing your odds of success. To set up a reduced-rate consultation, call the Tax Law Office of David W. Klasing at (800) 681-1295, or contact us online today.
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