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CA Board of Equalization: Changes to Sales-Use Tax Administration

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Effective July 1, 2017 California’s State Board of Equalization (“BOE’) is just a shell of its former self, as the state legislature with the support of Governor Jerry Brown voted to restructure the 100+ year old agency. The new law, the Taxpayer Transparency and Fairness Act of 2017, breaks the services of the old BOE into three separate entities: The State Board of Equalization, the California Department of Tax and Fee Administration (“CDTFA”), and the Office of Tax Appeals. Prior to the law change, the BOE oversaw the collection and administration of property, alcohol, and insurance taxes, as well as sales/use tax. The five member Board was made up of elected officials representing districts across the state. The Board also heard taxpayer appeals cases for all the aforementioned taxes and income/franchise taxes.

After the change, the Board of Equalization will continue to engage in its constitutional duties, including the administration of property taxes, alcoholic beverage excise taxes and taxes on insurers. Until the new Office of Tax Appeals becomes active in January 2018, the BOE will continue to hear all tax cases. After that date, they will be limited to hearing cases related to the taxes mentioned above.

The CDTFA, a separate entity housed under the Government Operations Agency, will now handle many of the taxes and fees previously administered by the BOE, most notably sales and use tax. Approximately 4,000+ former Board of Equalization employees (including sales tax auditors, etc.) will move over to the new entity. The CDTFA will be led by an acting director, David Botelho, who was appointed by Governor Brown. The appointment did not require Senate confirmation.

The Office of Tax Appeals is also now an independent entity created as of July 1, 2017, but it won’t be fully operational until January 1, 2018. At that time, it will begin hearing taxpayer appeals for Franchise Tax and Sales/Use tax. This agency will also be headed by government appointees.

According to the official new website and explanation, “This newly established department will lead to fair and equal tax administration in our state and will uphold the Taxpayers’ Bill of Rights,” said Government Operations Agency Secretary Marybel Batjer. “We are committed to a seamless transition and ensuring that taxpayers will see no difference in service.”

So, what does the change mean for taxpayers?

Immediately, not much will change. Although the state website already features a link to www.ctdfa.ca.gov, the site is purely informational at this time and links back to the old website. Tax information, forms, registration, and online sales tax returns are still operational on the old www.boe.ca.gov website and transition will likely happen somewhat gradually. In theory, you can’t just change things overnight. (Or maybe you can, as evidenced by passage of this law in the waning days of the legislative session!) Current filing deadlines, logins, etc. will remain the same until further notice.

Beginning in January, tax appeals will be addressed with the new Office of Tax Appeals, which will no longer be headed by an elected body. While one can argue that the elected body was not necessarily a perfect solution (and obviously the legislature thought not), critics of the new scheme argue that it allowed for perspective from those elected officials who may also have a business background and some “real life” opinions on the taxes administered by the state. Will an appeals board made up of bureaucrats see “business’s” side? We’ll have to see!

The State promises that all this will be seamless. Call me a skeptic, but I’m still anxious to see how it all goes. Good luck to taxpayers and representatives who have ongoing cases with auditors that might be in review. And what about appeals that may be in process? I’m sure they will all be handled eventually, but I’d probably advise caution in assuming that any of it is going to go as smoothly or timely as anticipated. Need help navigating an ongoing or pending sales tax audit in California (or other states)? Contact us at info@milesconsultinggroup.com.

Do you have questions about California (and/or multi-state) sales tax - or does your business need assistance with other tax issues?

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