Calif. small business and state tax question

[spectr17]

I just started a website with an online store. I set up as a L.L.C. sole proprietor. I work out of my home.

 

Do I have to collect California state tax on any items I sell from my online store?

 

Any gother gotchas to watch out for? Liability? Disclaimers etc.?

 

Thanks

[xGrendel]

You will want to check with a professional tax advisor or someone attached to your local government. I've heard about a million different versions of tax codes so it can be a bit hard to decipher truth from fiction.

 

Most states, at a minimum, require you to charge sales tax on any item delivered within the same state as the business. I have heard, but I have not confirmed, that California sales tax rates vary depending on the county or city you are shipping the goods to.

 

Here in Nebraska, I am required to remit sales tax payments and charge the local tax rate for my city, which is higher than the rest of the state.

[spectr17]

Thanks xGrendel, I'll keep digging.

[Guest]

All your answers can be found at http://www.ftb.ca.gov/ or by calling phone numbers listed on that site.

 

Oh and I can verify that each county has a floating tax rate ontop of state sales tax in California. In Los Angeles County it is currently 8.25% while the state sales tax is 7% I believe.

[FlyingMonkey]

All your answers can be found at http://www.ftb.ca.gov/ or by calling phone numbers listed on that site.

 

Oh and I can verify that each county has a floating tax rate ontop of state sales tax in California. In Los Angeles County it is currently 8.25% while the state sales tax is 7% I believe.

Exactly, I am an LLC Partnership.

[spectr17]

So what do you charge then for online sales in California?

 

I was told 7.25% by FTB but last week noticed that one big online site was charging 7.6%.

[Guest]

you should charge the tax rate for where your biz license is issued (county). this tax only applies to orders shipped within the state. out of state no tax. check with the gov. for specifics but this is how I have operated for some time and gone through a tax cycle already.

[salewit]

I was specifically told by the SBofE that I must charge the amount of sales tax based on the sales tax of where the BUYER is located. This is a real pain.

 

I'm currently installing a mod that someone made which deals with this. It is in the mods section and called "County/Zip Based Sales Tax". I tried installing it before, and all hell broke loose. I'm now on a new copy of OSC and have backed up so I'm going to give it another shot. I really don't know how else to deal with this without just charging one sales tax and taking the chance with the SBE. I suspect this is what most people do anyway.

[spectr17]

That's what I mean, you get a different answer each time you call SBoE. I'm going to charge my county rate since it's higher (7.75%) so I don't end up short.

 

Chargin each person by their county rate is going to be a pain. Please let us know how that mod works out salewit.

[spectr17]

From BOE Pub 105 dated 8/2003. Looks like 7.25% is the answer unless you want to collect the district tax as a courtesy to your customers. That would mean setting up a bunch of special districts but since osC doesn't have any way for the customer to input all the special tax districts I'll pass. You're not liable for the special district tax anyway according to the BOE.

 

Delivery to a location inside a special tax district The total tax rate in effect in a special tax district (statewide rate + district rate) generally applies to sales delivered or shipped into the district. However, if you are not engaged in business in the district, you are not required to collect the district use tax. Instead, you may calculate the tax due on your sale at the statewide rate of 7.25 percent (see ?Courtesy collection of use tax,? below). You are considered to be engaged in business in a special tax district and must collect and pay district use tax if you

 

? Have any kind of permanent or temporary business location in the district, including a warehouse, salesroom, or office;

 

? Have any kind of representative or agent in the district, even temporarily, who makes sales, takes orders, or makes deliveries for you;

 

? Use your own delivery vehicles to regularly deliver merchandise into or within the district; or

 

? Receive rental income from the lease of merchandise located in the district. As noted above, you may be engaged in business in a special tax district even if you do not have a permanent location there.

 

For example, if the sales representative for your Calaveras County business travels to San Joaquin County to take an order, you are considered to be engaged in business in the San Joaquin Transportation Authority special tax district. Tax would apply to your sale at the full rate in effect for San Joaquin County. You would report the San Joaquin Transportation Authority district tax on Schedule A of your sales and use tax return.

 

Courtesy collection of district use tax. As noted above, if you are not engaged in business in a special tax district you are not required to collect the district use tax on items you ship into the district. Your customer, however, is liable for the district use tax. As a courtesy to your customer, you may choose to collect the district use tax from them. If you do, you must report it on Schedule A of your return and pay it to us.

[FlyingMonkey]

Yes, you can charge 7.25% tax to everyone in California. EXCEPT people from your own county (district). The easiest way is to charge your sales tax rate, and give all of the money to FTB. You are not permitted to keep the extra tax revenue from the sales.

 

Example:

If someone from out of state purchases a product from http://www.newportpassions.com based in Orange County, CA. Then you don't need to collect sales tax.

If someone from outside of the OC purchases a product from http://www.newportpassions.com based in Orange County, CA. Then you only need to collect 7.25%

If someone from outside of the OC purchases a product from http://www.newportpassions.com based in Orange County, CA. Then you must collect 7.75%

 

It's easier just to collect 7.75% from everyone, than distinguish where the county lines are. If you collect 7.75% from people outside of your county, you must give the money to the FTB. It is illegal to keep. This is based on the same principle that if someone enters your retail store in the OC and purchases a product. They pay the full tax rate, and that amount is still given to your county (district).

[FlyingMonkey]

California Use Tax: Is if you as a customer purchases any products online from a company based outside of CA. Although, you do not pay any initial sales tax. You are suppose to report the transaction on your tax returns and pay "use tax" on the item. It's pretty hard for the BOE to catch, but is illegal not to report.