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Like most states, California broadly imposes sales tax on the sales of most products, with a few exceptions. This applies not only to physical businesses, but e-commerce companies and online retailers. California’s sales and use tax regulations are administered and enforced by the California Department of Tax and Fee Administration (CDTFA), which may audit your small business if you make sales tax errors. If there are indicators that the errors were willful, constituting sales tax fraud, you may be referred for a criminal investigation.
Whether you need aggressive criminal defense representation to deal with an indictment, have questions about how to prepare for a sales tax audit, wish to appeal the results of an audit, or simply want to go over your company’s current sales tax practices with an accountant, the versatile and award-winning team of California tax attorneys, CPAs, and EAs at the Tax Law Office of David W. Klasing can provide the tax assistance your business requires. Our criminal tax defense attorneys, sales tax audit lawyers, business accountants, and business tax attorneys can address your sales tax issue from every angle, providing comprehensive solutions.
See our Sales Tax Q and A library
Does California Have Sales Tax?
There is no federal sales tax law. Instead, each state regulates sales tax individually. Only a handful of states, including Montana and Oregon, do not impose sales tax. California belongs to the majority of states that have adopted sales tax regulations – which are aggressively enforced.
What is Exempt from Sales Tax?
Some products are exempt from California sales tax, including the following:
- Grocery items
- Medical devices
- Prescription medication
Who Must Collect Sales Tax in California?
You may be responsible for collecting and remitting sales tax in California if your business has what is called “sales tax nexus” (or simply “nexus”) with the state of California. To say that a business “has nexus with California” is like saying that the business has a major financial presence in California, triggering certain tax duties.
Generally, retailers who do business in California are considered to have nexus. This may be because they employ workers in the state of California, because they have shops or factories in California, because they store products at a warehouse in California, or because they made online sales to California customers that exceeded certain thresholds.
Internet sales tax regulations are becoming increasingly complex – and more strictly enforced – due to a Supreme Court decision, South Dakota v. Wayfair (2018), which holds internet businesses to rigorous, sometimes burdensome sales tax standards. If you need assistance with an internet sales tax issue, talk to our online business tax lawyers today.
Why Was My Business Chosen for a Sales Tax Audit?
California sales tax audits are conducted by the CDTFA. To reiterate, the CDTFA is the state tax agency presently responsible for administering California sales and use taxes, in addition to its “fuel, tobacco, alcohol, and cannabis taxes, as well as a variety of other taxes and fees that fund specific state programs.” (Business owners should note that California employment taxes are administered by the Employment Development Department (EDD) – not the CDTFA. Likewise, California personal and corporate income taxes are administered by the Franchise Tax Board, or FTB.)
The CDTFA may have targeted your business for audit for a number of reasons, also discussed here. While some audits are triggered by random computer selection, most originate from an issue such as an unfiled or a perception that inaccurate sales tax has been reported. Other common triggers for a sales tax audit include filing late, reporting substantial exempt sales, failing to remit sales taxes to the state, or claiming excessive tax credits.
In light of the Wayfair decision, online businesses are particularly vulnerable to sales tax audits in California. Furthermore, IRS auditors may look for your online business – even if the tax audit originates from a seemingly unrelated issue. The CDTFA shares tax information with the Internal Revenue Service, making it likely that you will face both state and IRS tax audits.
If you disagree with the results of a sales tax audit, you may be able to appeal. California tax appeals are handled by the Office of Tax Appeals (OTA), which was created in 2017 as a partial replacement for the Board of Equalization (BOE).
See our Audit Representation Q and A Library
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San Jose, California Sales Tax Lawyer and CPA for Audit and Appeals Representation
At the Tax Law Office of David W. Klasing, we are tax attorneys and CPAs who combine over 20 years of experience handling civil and criminal sales and use tax matters. We have a robust record of favorable outcomes in sales tax evasion egg shell audits, civil sales tax audits and appeals, and tax litigation arising from tax disputes.
Contact us online today to arrange a reduced rate consultation or call the Tax Law Office of David W. Klasing at (805) 617-4566 to speak with a sales tax lawyer near you. Our San Jose office is conveniently located to serve small, mid-sized, and large businesses throughout the region. Please note that consultations out of our San Jose office are by appointment only.
Note: If you have concerns about the privacy of our initial or subsequent communication and are unable to easily travel to our Irvine / Orange County Main Office, consider scheduling a GoToMeeting to safely and securely establish an initial or maintain an existing attorney client relationship. With end-to-end encryption, strong passwords and top-rated reliability, no one is messing with your meeting. To schedule a reduced rate initial consultation via GoToMeeting follow this link. Call our office and request a GoToMeeting if you are an existing client. We are generally happy to travel to any of our appointment only satellite offices for a subsequent meeting in appropriate circumstances once a relationship is established via a signed engagement letter and the payment of an initial retainer or where enough retainer is available where a current client to cover the reasonable travel time and time required for the meeting.
Will it cost me more to hire the Tax Law Offices of David W. Klasing, who’s main office and the vast majority of the firm’s staff is located in Irvine California, but an appointment only Satellite office is close to my location, as opposed to a local company? Absolutely not! See our policies that address this issue here:
