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CA State Board of Equalization ?

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.

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Reply to
di
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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.

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

Reply to
Stuart A. Bronstein

di wrote:

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.

Reply to
Katie

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