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California Sales Tax Training 2015
CCIA Fall Conference California Sales Tax Training 2015 Notes:
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Introduction Jacob Bholat – Managing Partner Equity Recovery Solutions
Leads sales tax consulting practice with extensive experience, including experience with large non-profit and government agencies 19 years consulting experience with Board of Equalization, Big 4 and Specialized Recovery Firms Primarily focused on Sales Tax Recovery, Audit Representation and Transactional planning
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What is Sales/Use Tax? Excise Tax – applied to retail sales made to the final consumer of a product Applies to Tangible Personal Property (TPP) Excludes Intangible Excludes Real Property Applied to every single purchase transaction Sale Consumption
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Who is Responsibility? Sales Tax – Seller ships from California Facility Obligation for tax falls on the Seller only Applies to sale from vendor in California Pay vendor for tax on Invoice CA vendors - inform them if tax mistakenly not collected and you are sure tax is due Use Tax – Seller ships from outside of CA Obligation for tax ultimately falls on Buyer Applies to use of property in State Accrue and pay use tax to state Non-California vendors – if they bill tax on some items, then double check to see if tax is actually due if you have item as taxable and they do not collect
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Using Resale Certificates
Ancillary Activities using Resale Certificates Vendor College Customer Purchase for resale (w/o tax) Must be “sale” to Customer Resale certificate legally transfer liability for tax to buyer. Use and Issuance should be strictly controlled.
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Common Sales Activities
Retail Sales Books, other student supplies – Taxable Food Students – exempt when sold on campus, during school hours Non Students Cold Food, water, candy – exempt Hot food, soda or dine in – taxable Admission charged upon entering an event – all items are taxable
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Taxability of Software & Maintenance
Software - includes license fees, site licensing and upgrades CD or Disk – taxable currently Electronic Delivery – exempt Hardware Maintenance Mandatory – taxable Optional – exempt Software Maintenance Mandatory – follows taxability of original software Optional With tangible property - 50% exempt Without tangible property – exempt Notes:
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Audit Management Planning Documentation presentation
Auditor Access to staff, records should be managed Sample Structuring – BOE tends to bias towards higher assessments Documentation presentation Invoice review – Missing invoices may be substituted, if agreed up front Software purchases – language should include delivery method Maintenance contract –optional or mandatory Repair contracts – Labor and parts not separated BOE staff tend to be aggressive against taxpayers without strong representation Refund Offset to Audit Liability
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Taxability of Leases Leases or rental of TPP
Must not have a nominal buyout option – Lesser of one percent or $100 - If nominal option, contract will be treated as a sale and all tax is due upon the first payment Application of Tax – Decision can never be changed! Election: Lessor must elect to pay tax on its purchase price of the leased property in the first 90 days of equipment rental. If no tax is paid - Default: Tax due on rental payments Compliance State Board of Equalization audit policy - Lessor is responsible Lessee has limited visibility to payment of tax
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Taxability of Construction
Contractor provides materials, fixtures and sometimes equipment Tax due on contractors cost of materials and fixtures Contractors are retailers of equipment All contractors are obligated to properly administer tax Contractors occasionally charge tax on invoice This is not a general practice, but they sometimes write contract to reimburse tax on marked up materials and fixtures Equipment sales are retail sales and should be taxed at final selling price Audit experience Use tax accruals for construction = overpayments Notes:
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Thank You Contact information Jacob Bholat - Partner Equity Recovery Solutions Inc Limitations of our Presentation Provides guidelines, there are many exceptions and decisions that often contradict basic rules California use only Based on current applicable law, regulations and rules (things are always changing) Notes:
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