If you’re a business in California that doesn’t maintain inventory or sell products—that is, you’re a service business—you haven’t had to register with the Board of Equalization. The Board of Equalization administers California’s sales tax laws. That may change, though. As part of the most recent budget deal California service businesses that have gross receipts over $100,000 will soon get a “Dear Valued Soon To Register with the BOE” letter. That’s right, if your gross receipts are over $100,000 you will have to register with the BOE and file an annual Use Tax Return.
The Use Tax is the equivalent of the sales tax for items purchased where no sales tax is charged. You are supposed to remit to the state Use Tax when you buy that book from Amazon.com or any other out of state retailer that doesn’t charge sales tax.
Of course, most individuals don’t comply with the Use Tax. The hope of the state legislature is that by forcing firms to register with the BOE and file a Use Tax Return that $26 million would be found in additional revenue. Consider, though, the cost to businesses in the state. More paperwork and a higher regulatory burden for California. It certainly doesn’t make this state seem golden for businesses.