Sanjiv Gupta's CPA firm can properly file your Sales Tax Return and Payroll Tax Return for your Small Business. Failure to collect & report sales tax collection and pay your payroll taxes can lead to interest and penalties.
Who needs to collect Sales Tax in the State of California?
All businesses that sell taxable goods and services in California are required to register with the California Department of Tax and Fee Administration (CDTFA) and to collect and pay taxes to the state. This also applies to out-of-state businesses that sell taxable goods or services in California.
There are a few types of businesses that are exempt from collecting and paying sales tax in California, including:
Businesses that sell only exempt items (such as most grocery items)
Businesses that make sales exclusively outside of California
What types of taxes does the State of California collect?
The state of California requires businesses to collect two main types of taxes: sales tax and use tax.
Sales tax is a tax on the sale of taxable goods and services in California. The current sales tax rate in California is 7.25%.
Use tax is a tax on the storage, use, or consumption of taxable goods and services in California when no sales tax was paid at the time of purchase. The use tax rate is the same as the sales tax rate, so it is also currently 7.25%.
What are the filing requirements for Sales Tax in California?
Returns: Sales tax returns are due on the 20th of the month following the reporting period. For example, if you are reporting sales made in January, your return is due on February 20th.
Payments: Sales tax payments are also due on the 20th of the month following the reporting period. However, if you owe less than $10,000 in taxes for the year, you may be eligible to file and pay quarterly.
Penalties and Interest: If you do not file your return or make your payment by the due date, you will be charged a late filing penalty of 5% of the tax due, plus a monthly interest charge of 1% on any unpaid tax.
How does the State of California collect Sales Tax?
When you register with the CDTFA to collect sales tax, you will be issued a Seller's Permit. This permit allows you to collect sales tax from your customers and remit it to the state on a regular basis.
If you make sales online, you will need to register for an account with CDTFA's eFile & Pay system. This system allows you to file and pay your sales tax returns electronically.
What are the consequences of not collecting and remitting Sales Tax in California?
If you do not collect and remit sales tax as required by law, you may be subject to civil or criminal penalties. These can include fines, jail time, or both. In addition, you may be liable for any unpaid taxes, plus interest and penalties.
If you are found to have willfully committed sales tax evasion, you may be subject to a penalty of up to twice the amount of taxes you owe, plus interest and penalties. You may also be subject to criminal prosecution, which can result in fines and jail time.
To avoid these penalties, it is important that you comply with all sales tax requirements in California. This includes registering for a Seller's Permit, collecting sales tax from your customers, and remitting it to the state on time. If you make sales online, you will also need to register for an account with CDTFA's eFile & Pay system.
If you have any questions about sales tax in California, you can contact the CDTFA at 1-800-400-7115.