darrensmithcpa

Why Accountants Are Like The Marine Corps

The Few. The Proud.

You may or may not know, but I received my Masters in Taxation after a stint in the Marine Corps.  The Marines certainly changed my perspective on life, and I thought I would share with you some key points of why a good accountant is like a good marine.

1. Semper Fidelas: “Always Faithful” is the official motto of the Marine Corps.  Your accountant should be faithful to you and your finances as well as the tax code.
2. Honor: This is the first commitment of the Marine Corps.  At the same time, there should be a high degree of integrity required when handling finances as an accountant, and they should also be respectful their communication to you as the client..
3. Courage: Within the Marine Corps, there are undoubtedly courageous men & women, and accountants need to be too. The entire architecture of the tax code represents shades of grey in terms of reporting and utilizing both credits and deductions.  Your accountant shouldn’t be afraid to take it on and battle it for your benefit.
4. Commitment: There is a spirit of determination and dedication for every marine and accountant.  Once they agree to take on a mission, consider it done.  Your accountant should have a relentless desire to work on your behalf over the long term.

So let me know if you need Marine Corps effort on your taxes or accounting needs. I am certain I can make it all work out for you!

Filing Tax Returns with BOE.

You will be required to file your use tax returns using BOE-file, BOE’s free electronic filing (e-File) system that enables taxpayers to use the internet to file a California sales and use tax return and make payment for amounts due.

The website is:  http://www.boe.ca.gov/elecsrv/efiling/sutd.htm.

The BOE will mail you a registration letter containing your account number and express login code.  These two numbers will enable you to e-file your use tax returns.  Subsequent tax returns are due yearly on April 15^th for the previous calendar year.

The SBE, on its website, advises taxpayers that they should review the SBE’s “In-State Consumer Voluntary Disclosure” program as it applies to the use tax. The benefits of this program are:

1. Limits the time the SBE can make an assessment for prior use tax to three years (instead of up to 10 years)
2. Allows the SBE to waive late filing and late payment penalties
3. Allows applicants to describe their circumstances and obtain from the SBE a written opinion regarding whether the SBE might approve their voluntary disclosure request.

To qualify for the In-State Consumer Voluntary Disclosure program, ALL of the following conditions must exist:

1. You reside or are located withinCaliforniaand have not previously registered with the SBE
2. You have not previously filed an individual use tax return with the SBE
3. You have not reported an amount for use tax on your individual income tax return filed with the FTB
4. You are not engaged in business in this state as a retailer (as defined in Revenue and Taxation Code Section 6015)
5. You have not been contacted by the SBE for failure to report the use tax imposed by Section 6202 of the Revenue and Taxation Code
6. Your purchase is not of a vehicle, vessel, or aircraft
7. You voluntarily came forward to the SBE

If you have use tax obligations and can meet the above requirements, you should consider registering with the SBE and file Form 404-DS to report your use tax obligation. Be sure to include Form BOE-38-I to request the benefits of the Voluntary Disclosure program.

Lastly, you need to be prepared to show that your out-of-state purchases are not subject to use tax or that you paid sales tax on the purchases so that you are not liable for the use tax. It is important that you retain your purchase invoices to show that you have paid sales tax on the item or that it is exempt from use and sales tax.

What is a qualified purchaser?

A qualified purchaser is defined as a person that meets the following conditions:

• the person is not already required to be registered with the SBE
• the person is not a holder of a use tax direct payment permit
• the person receives at least $100,000 in gross receipts from business operations per calendar year (gross receipts being the total of all receipts from both in-state and out-of-state business operations)
• the person is not otherwise registered with the SBE to report use tax

Section 6005 of the Revenue and Taxation Code defines a “person” to include, among other things, an individual, firm, partnership, joint venture, limited liability company, corporation or trust.

The third bullet-point here is what ensnares many, many small businesses and individuals. Anyone with gross receipts in excess of $100,000, regardless of gross margin on those receipts, and with no consideration of the type of business- be it a brick and mortar reseller, a manufacturer, or any type of professional service business, a reporting requirement now exists.

What if I don’t have $100,000 in gross receipts in the current year?

File form BOE-345-QP with the SBE updating your registration and informing them of your status change.

The SBE is reviewing records from the Franchise Tax Board to find those companies that have gross receipts in excess of $100,000 and that are not otherwise registered with the SBE. The SBE is now contacting qualified purchasers to file returns for 2007, 2008, 2009, and 2010.

What do I do if I receive a similar letter from the SBE requesting tax returns?

If the SBE is requesting that you register with them, complete Form 404A (Use Tax Registration) and send it back to them. The SBE then will determine if they are going to audit you or your company to see if you are use tax compliant. Alternatively, if you have not voluntarily reported your use tax obligation, you can be proactive and take steps to correct your errors.

A Brief Lesson on the California Use Tax Law.

Listen Up.

So many of my clients have received a notice from the California State Board of Equalization (SBE) indicating they are a “qualified purchaser”, further stating that tax returns are now due. What is this?  Am I really a “qualified purchaser”?  Do I owe any taxes, interest, or penalty on this? Here’s what you need to know:

Assembly Bill x4-18 was enacted as part of the 2009-2010 California State Budget and added Section 6225 to the California Revenue and Taxation Code. Section 6225 now requires that “qualified purchasers” register with the State Board of Equalization, report, and pay the use tax.

In effect,Californiais requiring purchasers of a certain size to go on record by filing a tax return for use tax.  This providesCaliforniaa population of returns to further audit if warranted.

The State ofCaliforniahas always required individuals and businesses to pay aCaliforniause tax. This is only for those who have made purchases outside ofCaliforniawhere no sales tax was charged on the transaction.  The use tax is basically a sales tax on items where sales tax was not charged.

There are 2 main reasons for this law:

1)  To paying field with purchases in-state.

2)  To dissuade the motivation to avoid paying sales tax by making purchases out of state.

As almost all people (and a substantial majority of businesses) can attest that enforcement of this law has been unsuccessful. This is because not many people are actually aware of this law, and those who are aware don’t always choose to follow it. I have never had a client file a use tax return if they were not obligated to do so.