How Much in Penalties Can the BOE Charge Me?

On: May 11, 2018

The reasons for interest and penalty charges vary. For example, you may be assessed penalty and interest charges if you:

File a late return and/or make a late payment

A 10 percent penalty if your tax payment is late If you file a late return and make a late payment, your penalty will not exceed 10 percent of the amount of tax due for the reporting period.

Do not include a payment or sufficient payment with your balance-due return

A 40 percent penalty can apply if you collect sales and use tax but fail to pay it to us. We review each application to decide reasonable cause or uncontrollable circumstances if you fail to pay your taxes. The penalty will not be assessed if any of the following apply: • The unreported tax averages less than $1,000 each month, or • The unreported tax is less than 5 percent of the total tax due from that period.

The failure to file and pay is because of reasonable cause or circumstances beyond your control, such as: ∘ A death or serious illness in the immediate family. ∘ A natural disaster or catastrophe directly affecting the business. ∘ We sent tax returns to a wrong address. ∘ You fail to make a timely payment only once over a three-year period, or once during the period in which you were engaged in business, whichever time period is shorter. ∘ You voluntarily correct errors in paying sales tax or use tax collected and paid the amount due as a result of those errors prior to being contacted by us regarding possible errors or discrepancies. The penalty applies when you knowingly collect tax and fail to timely pay the amounts owed to the state. If you have been penalized, you can request relief by proving reasonable cause or circumstances beyond your control that affected reporting tax.

Do not report tax on a taxable transaction

• A 10 percent penalty if you do not file your tax return by its due date
• A 10 percent penalty if your tax payment is late

Calculate tax at the incorrect rate

• A 10 percent penalty if you do not file your tax return by its due date
• A 10 percent penalty if your tax payment is late

Do not file a return

The penalty for failure to file a return is 10 percent of the tax amount that is due for each billing. An additional 25 percent penalty applies if the failure to file was due to fraud or intent to evade the Sales and Use Tax Law or regulations.

Operate a business without the required BOE-issued permits or licenses

You are required to obtain a seller’s permit if you are engaged in business in California and intend to sell or lease items that are ordinarily subject to sales tax when sold at retail (even if you make no retail sales). If you do not obtain a valid seller’s permit prior to the date in which the first tax return is due, you are subject to penalty and interest charges. If a citation is issued the business owners will be required to appear in court and may be subject to fines up to $5000 and/or one year in jail. Any back taxes, including penalty and interest, must also be paid We may require other licenses or permits, depending on the nature of the business.

Penalties. You will be charged a 10 percent penalty on the taxes due for failing to file a return by its due date. You could also be charged an additional 50 percent penalty if it is determined that, in order to evade tax, you knowingly failed to obtain a valid seller’s permit prior to the date on which the first tax return was due. The 50 percent penalty applies to the taxes that should have been paid during the period you were engaged in business in California without a valid permit. If your taxable sales during the period averaged $1,000 or less per month, the 50 percent penalty does not apply. The 50 percent penalty also does not apply to sales of vehicles, vessels, or aircraft if the transaction is subject to a 50 percent penalty for registering outside of California to evade payment of tax.

Misuse a resale certificate or make sales without a valid permit

The penalty for the improper use of a resale certificate is $500 for each transaction or 10 percent of the amount of tax due, whichever is higher. In addition, if you fail to report and pay use tax due on the use of the improperly purchased property, you may be liable for the 10 percent penalty for negligence or the 25 percent penalty for fraud.

Knowingly collect sales tax reimbursement or use tax (tax) and fail to pay the tax to us.

• A 10 percent penalty if you do not file your tax return by its due date
• A 10 percent penalty if your tax payment is late

Collection Cost Recovery Fee

The BOE is required by law to impose a collection cost recovery fee (CRF) on past due liabilities. The CRF is intended to cover costs incurred in obtaining payment of past due amounts and it applies to most tax and fee programs administered by us. You may be assessed a CRF if you:

• Do not pay your amount due in full within 90 days after the demand notice is issued
• Do not timely enter into a payment plan and successfully complete the terms of the agreement