CA State Board of Equalization ?

di wrote:

- quote -

> Our small business (two artists working under an S-Corp) is
> doing a (public art) project in CA. We have complete a total
> of three projects in CA, all which occurred several years
> ago. Two were contracted with governmental agencies and
> therefore were sales tax exempt.
> At the onset of our last project in CA, in which our client
> was corporate rather than governmental, we registered with
> the State Board of Equalization and had to pay sales tax in
> CA and franchise tax of at least $800. The system was very
> burdensome. I have been told by someone that if your work in
> CA is limited (just the one project?) that you do not have
> to register with the State Board of Equalization. Can
> someone with experience in doing business in CA provide me
> with some specific information as to my tax responsibilities
> and the perameters, etc. I have found, in the past, that
> contacting governmental agencies directly does not mean that
> you will get a clear and concise answer as to your
> responsibilities.
> Can anyone provide me with any info or a specific source
> that would help determine my responsibilities? Thank you for
> any responses.

For sales and use tax purposes, Calif. Rev. & Tax. Code Sec.
6018 defines a "retailer" as any person who is engaged in
the business of selling tangible personal property, or any
person who makes more than two significant sales of TPP
within a 12-month period (even though not normally in the
business of doing so). If your company is normally a seller
of TPP (e.g., it is registered as a seller in the state
where it is headquartered), it is a retailer for California
purposes if it is physically present here.

There are some exceptions for participants in trade shows,
conventions, etc. As long as their activities in California
are limited as outlined in the statute, they do not become
subject to use tax collection on their sales shipped from
outside the state to California customers by virtue of
having been present in the state at a trade show or
convention. However, they are still required to register,
collect and pay over sales taxes on any sales they make at
the trade show or convention.

One way to avoid the sales tax registration would be to find
out if your customer has, or is willing to obtain, a direct
pay permit from the SBE. Then the customer, not you, would
be responsible for paying over the sales tax to the state.
The customer would give you a certificate as evidence that
it had a direct pay permit.

As far as the franchise tax is concerned, it applies to all
corporations "doing business" in California. "Doing
business" is very broadly defined as "engaging in any
activity for pecuniary gain or profit." Again, there are
some special rules for certain activities, such as trade
shows, conventions, employee training, etc., but it doesn't
sound as though any of them would apply to your corporation.

Sorry, but if you want to do business in California, you
will be subject to the franchise tax and your sales will be
subject to California sales tax.

Katie in San Diego

The foregoing is intended for educational purposes only and
does not constitute legal or professional advice.

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"di" <diana[at]bradjgoldberg.com> wrote:

- quote -

> Our small business (two artists working under an S-Corp) is
> doing a (public art) project in CA. We have complete a total
> of three projects in CA, all which occurred several years
> ago. Two were contracted with governmental agencies and
> therefore were sales tax exempt.
> At the onset of our last project in CA, in which our client
> was corporate rather than governmental, we registered with
> the State Board of Equalization and had to pay sales tax in
> CA and franchise tax of at least $800. The system was very
> burdensome. I have been told by someone that if your work in
> CA is limited (just the one project?) that you do not have
> to register with the State Board of Equalization.

Sorry, that's untrue.

You may have been better off to create a non-profit to
perform these kinds of services. Sales tax would still be
due, but not franchise tax.

- quote -

> Can anyone provide me with any info or a specific source
> that would help determine my responsibilities? Thank you for
> any responses.

If you make a taxable sale in California, you are required
to collect sales tax. If you transact any business in
California you are required to register to transact
business. It's that simple.

Stu

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

Our small business (two artists working under an S-Corp) is
doing a (public art) project in CA. We have complete a total
of three projects in CA, all which occurred several years
ago. Two were contracted with governmental agencies and
therefore were sales tax exempt.

At the onset of our last project in CA, in which our client
was corporate rather than governmental, we registered with
the State Board of Equalization and had to pay sales tax in
CA and franchise tax of at least $800. The system was very
burdensome. I have been told by someone that if your work in
CA is limited (just the one project?) that you do not have
to register with the State Board of Equalization. Can
someone with experience in doing business in CA provide me
with some specific information as to my tax responsibilities
and the perameters, etc. I have found, in the past, that
contacting governmental agencies directly does not mean that
you will get a clear and concise answer as to your
responsibilities.

Can anyone provide me with any info or a specific source
that would help determine my responsibilities? Thank you for
any responses.

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->