California tax question

[OwlKaMyst]

Originally Posted by user_id

If all you're doing is having products shipped to CA addresses and have no business nexus in the state then you don't owe any California taxes.

That's what one would think, but that is not how the article reads...

As a result of these amendments, many out-of-state taxpayers will now be subject to California taxes. The changes impose significant information and record- keeping burdens on upper-tier partners as well as members of partnerships and LLCs. These taxpayers will have to determine whether they are subject to tax under the new rules by June 15 of this year to avoid penalties!
Under the new amendments, taxpayers will be considered to be doing business in California for California tax purposes if they satisfy one of four tests.

1. Is the taxpayer organized or commercially domiciled in California?
2. Do annual sales in California exceed the LESSER of $500,000 or 25% of total sales?
3. Does the value of real and tangible property in California exceed the LESSER of $50,000 or 25% of total property?
4. Does payroll in California exceeds the LESSER of $50,000 or 25% of total payroll?

Even if they fail to meet the four tests, they will still be required to pay taxes in California if they engage in
ANY transaction for financial or pecuniary gain within the state.

Under the new rules, sales from services are classified as California sales if the purchaser of the service is located in California, regardless of where the services are performed. This could result in an out-of- state service partnership, such as a New York law firm, being subject to tax in California even though the services are performed outside of California and the firm has no property or payroll in California.

[chuckmann]

I do not know if the following is directly relevant to the article in question.

California seeks to collect sales tax from goods sold on the internet. The state would also like to collect sales tax on goods purchased by Californians who travel to Oregon and Nevada to buy things. However that is difficult to do unless tattlers pointing out such people to the authorities.

California also seeks to charge income tax from those who travel to California for work. The most well known of these are professional athletes, who already pay California income taxes on that percentage of their income which is earned in California. So when the Red Sox come in to play the A's, every member of the team, including the coaches, trainers, and bat boys, pays that income tax.

Maybe California wants to tax the percentage of a business owner's income that derives from sales to Californians, separate from the sales tax?

[user_id]

Originally Posted by OwlKaMyst

That's what one would think, but that is not how the article reads...

Nothing in what you posted would suggest that a business that merely ships a product to California and has no operations in California and is not a partner in any California business would owe California taxes. And nothing at the FTB would suggest this would be the case.

[user_id]

Originally Posted by chuckmann

I do not know if the following is directly relevant to the article in question.

California seeks to collect sales tax from goods sold on the internet. The state would also like to collect sales tax on goods purchased by Californians who travel to Oregon and Nevada to buy things. However that is difficult to do unless tattlers pointing out such people to the authorities.

This is a separate issue and doesn't represent any new taxes. When you purchase something over the internet and don't pay sales tax you're suppose to report it on your tax return and pay use tax....but peoplely rarely do and its very difficult to enforce. California, and many other states, are pushing federal changes that would allow them to force foreign businesses to collect CA sales tax for CA residents.

[Ultrarunner]

Here's the issue...

Californian are required to pay taxes due...

Buying online from out of state vendors leaves the onus to pay on the resident...

It is much more effective to compel business to work as unpaid tax collectors...

A few years ago, people would travel to the next county to save a percent on sales tax... now, Auto and other large purchase Dealers like farm equipment charge sales tax on where the person resides...

[expatCA]

Originally Posted by ottomobeale

Trying to make sense of this.
google:
venable.com
California's New Tax Law Vastly Extends Its Taxing Reach.
Its a pdf

Does this mean any company doing 500K or 25% owes taxes regardless?

Let me make a hypothetical for clarity.

Joe 100% owns joeswrenches.com LLC and does 10MM in business a year gross.
CA being 12% of the population 1.2 million in sales to CA residents.
Its all shipped from his Ohio warehouse. He lives in Ohio. He has zero employees in CA. He has nothing in CA and in fact has never visited.

He owes taxes on 12% of his income?

Seems like soon we would all have to do 50 state tax forms each year.

Can someone clarify?

This is not new and has been around since 2011 as far as I can tell.

[RMESMH]

Originally Posted by Ultrarunner

A few years ago, people would travel to the next county to save a percent on sales tax... now, Auto and other large purchase Dealers like farm equipment charge sales tax on where the person resides...

Sad. Texas addresses this, at least re autos, in a way that helps consumers and puts all car dealers on a level playing field. The minimum sales tax percentage in Texas is 6.25%. Some locales charge this amount, but all locales can add any additional percentage up to a maximum of 2%. To eliminate 'percentage shopping' re sales tax for autos, Texas charges the state MINIMUM of 6.25% sales tax on autos, no matter where in the state you make the purchase or where in the state you live. I purchased a car in another state (not California or Texas). The other state charged me the Texas maximum of 8.25%. Texas has a reciprocal agreement with that other state. When I did the permanent registration in Texas, they told me I didn't owe anything and should have been charged 6.25%. I did some research and found what the dealer owed/paid their state and local...under a $50 difference from the 6.25% I should have paid. The dealer had pocketed the difference. The day before I was planning to call the dealer to complain, I got a check from the dealer for the 2% error. The accounting department at the dealer had uncovered the error.


I remember years ago the FTB in California used to hunt down people who had retired to another state and assessed California state income tax each year on the portion of their previous earnings that they earned in California....until someone got fed up, sued them, and won.