Sales tax in California pays for a wide range of programs such as criminal justice, health programs, higher education, and K-12 education. For one reason or another, you may fail to pay this tax on behalf of your business. This is where Tax Law Advocates come into play. 

We have a dedicated team of tax attorneys and accountants who work tirelessly to make sure the state of California hears you out and reduces the tax debt or potential penalty.

Penalty Types You Can Face in a California Sales Tax Audit

CDTFA (California Department of Tax and Fee Administration) will impose penalties if it is justified by the omissions or acts of the taxpayer. These penalties include:

1. Penalty for Failure to Pay

RTC (Revenue and Taxation Code) section 6591 imposes a 10% penalty if you fail to pay tax or if the tax is not paid on time. Moreover, RTC section 6565 imposes a 10% penalty if you fail to pay the amount that the CDTFA determined. You are also likely to face a 6% penalty from RTC section 6476 if you make a prepayment late.

RTC section 6477 is moved to RTC section 6478 (which is from a penalty of 6% to a penalty of 10%) if the failure to make the prepayment was due to negligence from your end. This penalty can also be a result of intentionally disregarding the Sales and Use Tax Law. Taxpayers required to pay taxes through EFT (Electronic Fund Transfer) but fail to do so are likely to face penalties imposed in RTC sections 6591 and 6479.3.

2. Failure to File a Return Penalty

You are likely to face a penalty if you fail to file a return. CDTFA and the law require that you file returns at specific intervals if you have an active CDTFA account. Failure to do so will see RTC section 6591 impose a 10% penalty on you. It is important to note that this penalty is imposed for the period for which the tax return was required. For instance, if you are supposed to file a tax return every month but fail to do so, then the penalty you will face will be for the month you failed to file a return.

There are two categories of penalties:

  • Discretionary Penalties
  • Mandatory Penalties

While mandatory penalties are imposed automatically, penalties under the discretionary category can be assessed. Auditors do this during audits. Although mandatory penalties are imposed automatically, you may receive relief through reduction or cancellation.

Penalty for failure to pay, failure to pay prepayment amounts, and failure to file a return are all under mandatory penalties. Also, there is the Amnesty interest penalty where RTC section 7074(a) as well as Double Amnesty penalty 7073 impose a 50% penalty.

Discretionary penalties, on the other hand, include:

  • 25% penalty under RTC 6514 and 6485 for fraud or planning to evade the law
  • 10% penalty under RTC 6484 and 6478 for negligence or intentionally disregarding the law
  • $500 penalty under RTC 6077 for failing to obtain a permit before conducting or engaging in a business as a retail florist
  • $500 penalty or 10% penalty of the tax due under RTC 6094.5 and 6072 for improperly using a resale certificate to evade the tax penalty or for personal gain.
  • $500 penalty under RTC 6074 for failing to obtain evidence showing that the catering truck operator holds a valid seller’s permit.
  • 40% penalty under RTC 6597 for failing to remit the reimbursement of sales tax or failing to use the tax collected
  • 50% penalty under RTC 6514.1 and 6485.1 for registering a vessel, aircraft, or vehicle outside California with the intention of evading tax.

Reduction of California Sales Tax For Businesses & Business Owners

A reduction of CA Sales Tax is done through a proposal called an Offer in Compromise, or simply, OIC. This proposal allows you to pay CDTFA an amount, which is less than the fee liability due or full tax.

For you to qualify for a reduction of CA Sales Tax, you must meet all of these criteria:

  • Unable to pay the entire amount you owe in a reasonable time period
  • Your fee liability or final tax is on a closed account
  • You are not disputing the amount of fee or tax you owe
  • You are no longer part of the business, which incurred the liability

About California Department of Tax and Fee Administration (CDTFA)

CDTFA is a body that administers Sales and Use Taxes in California. It also administers other taxes and fees, which fund specific programs of the state. The programs CDTFA administers collect more than $70 billion every year.

Well, this revenue is channeled to supporting local essential services such as public safety & health, social services, transportation, schools, libraries, and natural resource management programs.

CDTFA offices are located throughout California to make it easy to serve fee-payers and taxpayers in California.

Who is Subject to Paying CDTFA Returns and Sales Taxes?

If you are a retailer engaging in business in the state of California, then you must pay the state’s sale tax. But before you do that, you will have to register with the CDTFA. Well, the state’s sale tax applies to all retail sales of merchandise and goods. It, however, does not apply to those sales the law specifically exempts.

Contact Us Today!

At Tax Law Advocates, we have a team of dedicated and experienced agents, accountants, and tax attorneys. All of these individuals are federally licensed to help you sort out issues with both IRS and state tax authorities.

Every time a client approaches us, we first go through a detailed consultation with them so we can better understand their situation. We do this because we want to make sure the tax resolutions we come up with are helpful in the long run.

Therefore, whether your problem is unfiled taxes or looking for someone to help you negotiate with the state of California so your tax debt and penalties can be reduced, look no further than Tax Law Advocates.

Give us a call or drop us a message today to learn more about us and our services.