Sales Tax Law Archives - McClellan Davis, LLC

California Court Finds that Sales/Use Taxes Collected from Customers Outside the State Are Not California Excess Tax Reimbursement

Facts and Background

In a significant victory for taxpayers selling multistate from California, the Sacramento County Superior Court recently ruled in favor of Body Wise International LLC, rejecting the California Department of Tax and Fee Administration’s (“CDTFA” formerly known as the Board of Equalization) attempt to characterize out-of-state tax collections as California “excess tax reimbursement.” (Body Wise International LLC vs. California Department of Tax and Fee Administration, Case No. 34-2023-00333398.)

The case arises from an audit covering the period April 2010 through June 2013, during which Body Wise—a retailer of nutritional […]

CDTFA Revises Policy Regarding 40 Percent Unremitted Tax Penalty

Pursuant to Revenue and Taxation Code section 6597, any person who knowingly collects sales tax reimbursement and who fails to remit the sales tax reimbursement to the California Department of Tax and Fee Administration (CDTFA) can be held liable for a penalty of 40% of the unreported tax amount, if the tax amount exceeds $1,000 per month and is in excess of 5% of the total tax due for any reporting period.

Historically, CDTFA has been hesitant to apply the penalty in most circumstances even when the numerical thresholds are met unless CDTFA has been able to establish that the failure […]

Supreme Court’s Wayfair Decision Will Force More Remote Sellers to Collect Sales and Use Tax

Last month we reported that a pending U.S. Supreme Court case, South Dakota v. Wayfair, Inc. (U.S. S.Ct., Dkt. No. 17-494, 06/21/2018), might expand the rights of states to impose their sales and use taxes on out-of-state sellers. The Court’s June 21, 2018 Wayfair decision has done exactly that.

The decision overturned the physical presence requirement, a 51-year-old standard for determining when remote sellers must collect sales or use taxes on behalf of states other than their own. Now, a state may impose registration and collection requirements even if there is no physical presence inside the destination state in which the […]

Supreme Court May Change the Nation Sales and Use Tax Landscape in the Wayfair Case!

If you’re doing business in more than one state, you’d best pay attention to a pending U.S. Supreme Court case entitled South Dakota v. Wayfair (2017 S.D. 56, 901 N.W.2d 754, cert. granted, U.S. S. Ct., Dkt. No. 17-494, 01/12/2018). The outcome will either clarify or expand states’ rights to impose their sales or use taxes on out-of-state sellers.

Background

Every state with a sales tax also has a complementary use tax. The purpose of the use tax is to capture any transaction that normally would have been subject to sales tax but somehow escaped the tax, generally because the purchase was […]

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