My Experience before the Office of Tax Appeals

My Experience before the Office of Tax Appeals

If you dispute an income tax matter with the Franchise Tax Board (FTB), and timely file a protest, you may find yourself before the Office of Tax Appeals (OTA).

Prior to 2018, your appeal would have been heard by the Board of Equalization (BOE).  Now, as of January 1, 2018, these appeals are heard by the OTA.

The OTA is an “independent body created by the Taxpayer Transparency and Fairness Act of 2017. Its mission is to provide a fair, objective and timely process for appeals from California taxpayers.”

This past week I had a hearing before the OTA.  I was careful to review the Emergency Regulations prior to the hearing, but many issues, as one might imagine, are not covered by the Emergency Regulations.  The Government Code provides some additional assistance, but also does not cover every issue that we encountered.

In said instances, the California Evidence Code (CEC) was referred to.  For example, an evidence issue came up during the hearing with respect to whether a witness could refer to her notes to refresh her recollection, and the CEC was consulted.

During the hearing, the Appellant was given the opportunity to give an opening statement.  The Respondent (FTB) then made its opening statement.  Following the opening statements, witnesses were called by Appellant.

Appellant had an opportunity to direct examine the witnesses, and Respondent had an opportunity to cross-examine the witnesses.  Thereafter, the panel of three judges did their own cross-examination of the witnesses.  After the panel of judges questioned the witnesses, both Appellant and Respondent were given opportunities to ask follow up questions.  Basically, everyone was allowed to continue to ask questions until all questions were exhausted.

I have concerns about how the witnesses were examined, since OTA is supposed to be an independent body.  It did not seem right to have the panel of judges do their own cross-examination.  Also, there were some questions from the judge’s panel in which a witness was asked to speculate about documents they did not prepare.

It would seem more appropriate that Respondent do their own cross-examination, and that Respondent’s arguments be considered only in contrast with Appellant’s arguments.

In any event, after the witnesses were called, Appellant was given an opportunity to make a closing statement.  The judge’s panel requested that we address approximately 6 or 7 different points in our closing.  Respondent was then given an opportunity to make a closing statement, and Appellant had one final statement in rebuttal.  Then the matter concluded.

The hearing started promptly at 9 AM, but it did not conclude until nearly 5 PM.

The judge’s panel indicated we would receive a decision in no time at all – only 100 days or less….

Mendes Weed, LLP is one of the only law firms that has had an opportunity to go before the newly formed OTA.  To date, there have been less than ten oral hearings before the OTA.  If you dispute your tax liability, we can assist you with the protest and hearing.

You have a right to pay only the correct amount of tax, not a penny more.  If you find that you need assistance, please contact us today.

If you have questions about which business entity might be right for you, you should reach out to a tax lawyer who can assist you with your questions and concerns.

Mendes Weed, LLP is here to help you if you have any questions.  (925) 390-3222.

 

The tips and materials provided on this page are for informational purposes only, offered as public service. No information on this website should be considered legal advice or used as a substitute for legal advice. For legal advice, you should contact an attorney directly.

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[Video] CA Tax & Licensing Overview for Cannabis Businesses

If you are interested in the California tax and licensing overview for cannabis businesses, you should consider the following information:

Licensing of Cannabis

The Bureau of Cannabis Control (BCC) is the lead agency in developing regulations for medical and adult-use cannabis in California. BCC is responsible for licensing retailers, distributors, testing labs and microbusinesses. BCC is currently accepting licensing applications. New users will be required to register an account on the Bureau’s online self-service portal prior to applying for a license.

The Manufactured Cannabis Safety Branch, a division of the California Department of Public Health (CDPH)is responsible for regulating the manufacturers of cannabis-infused edibles for both medical and nonmedical use. CDPH is currently accepting licensing applications. Interested parties can submit their temporary license application by email or mail to the Manufactured Cannabis Safety Branch with a copy of their local authorization.

Manufactured Cannabis Licensing System, a division of the California Department of Food and Agriculture (CDFA), is responsible for licensing cultivators of medicinal and adult-use (recreational) cannabis and implementing a track-and-trace system to record the movement of cannabis through the distribution chain. CDFA is currently accepting temporary licensing applications. 

Those interested in preparing for the application process are also encouraged to read through each licensing authority’s proposed emergency regulations.

Temporary License Application Information

Business and Professions Code section 26050.1 allows the Bureau of Cannabis Control to issue temporary licenses. A temporary license is a conditional license that allows a business to engage in commercial cannabis activity for a period of 120 days. The Bureau can only issue a temporary license if the applicant has a valid license, permit, or other authorization issued by the local jurisdiction.

The Bureau intends to start issuing temporary licenses on January 1, 2018. NO TEMPORARY LICENSE WILL BE EFFECTIVE PRIOR TO JANUARY 1, 2018.

Tax Guide for Cannabis Businesses

If you sell cannabis or cannabis products, you must register with the California Department of Tax and Fee Administration (CDTFA) for a seller’s permit. Cannabis cultivators, processors, manufacturers, retailers, microbusinesses, and distributors making sales are required to obtain and maintain a seller’s permit as a prerequisite for applying for a license with the California Department of Food and Agriculture, the California Department of Consumer Affairs, or the California Department of Public Health.

Distributors of cannabis and cannabis products must also register with the CDTFA for a cannabis tax permit to report and pay the two new cannabis taxes to the CDTFA. The cannabis tax permit is in addition to your seller’s permit.

Beginning January 1, 2018, two new cannabis taxes will be in effect:

  • A 15 percent excise tax is imposed upon purchasers of cannabis and cannabis products. Retailers are required to collect the excise tax from the purchaser and pay it to the cannabis distributor.
  • A tax on the cultivation of cannabis that enters the commercial market is imposed upon cultivators. Cultivators are required to pay the cultivation tax to either a distributor or a manufacturer depending upon the nature of the transaction. The cultivation tax rates are:
  • $9.25 per dry-weight ounce of cannabis flowers, and
  • $2.75 per dry-weight ounce of cannabis leaves.
  • Additional categories and rates may be specified at a later date.

All cannabis businesses making sales are required to:

  • Register online with the CDTFA for a seller’s permit.
  • File sales and use tax returns electronically and pay any sales and use tax to the CDTFA. Even if none of your sales are subject to sales tax, you are still required to file a return and report your activities on your return to the CDTFA.

In addition, if you are a cannabis distributor, the following requirements apply to you:

  • Prior to January 1, 2018, register online with the CDTFA for a cannabis tax permit. (Registration will be available in November 2017.)
  • Beginning January 1, 2018, collect the excise tax from retailers you supply.
  • Beginning January 1, 2018, collect the cultivation tax from cultivators or manufacturers that send or transfer cannabis and cannabis products to you.
  • File both your cannabis tax and sales and use tax returns electronically and pay any tax amounts due to the CDTFA.

If you have any questions, please feel free to contact Mendes Weed, LLP to schedule an appointment.

Tax Guide for Cannabis Businesses – Tips from a California Tax Attorney

This video only covers California law, please remember that cannabis is still a Schedule I drug under the Federal Controlled Substances Act and wholly illegal, even for medical use. Anyone interested in this industry should make sure they are fully informed of the Federal laws related to cannabis. Contact Mendes Weed, LLP for more information.

Disclaimer: The tips and materials provided on this page are for informational purposes only, offered as public service. No information on this website should be considered legal advice or used as a substitute for legal advice. For legal advice, you should contact an attorney directly.

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California Tax Law and Sales Tax Information for San Francisco Retail Businesses

California Tax Law and Sales Tax Information for San Francisco Retail Businesses

If you run a new or established retail business in the San Francisco area, you may want to take a minute to brief yourself on tax laws for businesses. According to California tax laws, as imposed by the California State Board of Equalization, every non-exempt retail business that sells tangible, personal property for storage, use, or other consumption is required to charge sales tax, collect it and provide a receipt to the purchaser, and remit it to their taxing authority.

What Constitutes a Retail Business?

 A retail business sells physical goods rather than services and charges consumers money for these material products.  Any retailer engaged in business and having a significant presence in California, also known as sales tax nexus, for the purposes of commerce, constitutes a retail business and must charge, collect, and remit sales tax.

Tips for Determining if Your San Francisco Retail Business Should Charge, Collect, and Remit Sales Tax

 If you can answer “Yes” to any of the following questions, as a retail business, your business should be charging, collecting, and remitting sales tax.

  • Does your business inhabit a physical location such as an office space, warehouse, storage room, or place of distribution?
  • Do you have any person working for you such as a representative, sales person, or contractor?
  • Has your business ever sold product at an out-of-state trade show?
  • Have you used an affiliate to refer business via a website or other internet-based link to sell product? AND have sales from this person exceeded $10,000 in the preceding 12 months AND are your preceding 12 months’ in-state sales in excess of $1 million?
  • Does your business incur income due to leasing rentals of tangible products?

Avoid Penalties for Not Complying with Business Tax Law for Sales Tax

As a business owner in California, whether in San Francisco or any other city and selling material goods, it is imperative that you charge, collect, and remit sales tax on any retail items you sell.

Failure to comply with the California sales tax laws for businesses could result in penalties, fines, additional interest, court costs, and an audit of your business.

You may be required to come up with the money out-of-pocket, which could cause hardship and undue stress. Failure to collect sales tax could be construed as tax fraud, in which case, criminal charges may be brought against you.

Helping Clients in San Francisco and Throughout California With Their Tax Law Questions

If you have questions related to business tax law and sales tax as it relates to your San Francisco business, please contact Mendes Weed, LLP.  We have office locations in San Francisco, Sacramento and Walnut Creek and are available to meet by appointment.

Mendes Weed, LLP helps businesses comply with the tax laws, and we may be able to help you as well. With offices in Walnut Creek, Sacramento and San Francisco, we are conveniently situated to serve Northern California, but we assist clients throughout California and the U.S.

Disclaimer: The tips and materials provided on this page are for informational purposes only, offered as public service. No information on this website should be considered legal advice or used as a substitute for legal advice. For legal advice, you should contact an attorney directly.

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California State Taxes: Last Minute Income Tax Tips from the Tax Attorney

California State Taxes: Last Minute Income Tax Tips from the Tax Attorney

The deadline for California state taxes is on the horizon. If you are still putting together the your California tax filings, these last-minute tax tips could save you money and time!

The biggest thing to remember is the date Tuesday, April 18, 2017. That’s when your 2016 Personal Income Tax returns are due. Because April 15 falls on a Saturday, and Monday April 17th is the federal holiday Emancipation Day, tax day is occurring a little later than usual.

If you can’t file on time, April 18th is also the due date for a California state tax extension. Extensions in California are automatically granted as long as you file by the due date. If you do file for a California state tax extension, you must also remember the date October 16, 2017. That’s when your return will be due.

Now, let’s take a look at some credits for California’s state taxes

With a tax credit, your can claim a specific amount of reduction in the taxes you owe. Credits for California state taxes exist to provide relief for California households that qualify, and so they are relevant only to very specific situations.

Joint custody head of household credit (CA Code 170)

This credit is available if you were unmarried at the and of the taxable year, or if you were married but lived apart from your spouse, and your filing status is married filing separately. It also requires that you paid for more than half the household expenses for the main home for your child at least 146, but no more than 219 days of the tax year. The benefit if you qualify is 30% of your California tax, up to a maximum credit of $440.

Qualified senior head of household credit

If you were 65 or older as of December 31 of the tax year, you can take advantage of this tax credit in California. You must also have a maximum California adjusted gross income (AGI) of $71,370. The benefit for this credit is 2% of your taxable California income, at a maximum of $1,345.

Nonrefundable renter’s credit

If you were a California resident for the entire tax year, and your adjusted gross income is $39,062 or less, you may qualify for the $60 renter’s credit. For those who are married or in a domestic partnership filing jointly, head of household, or as a qualifying widow(er), your adjusted gross income must be $78,125 or less, and your credit would be $120 for your California state taxes.

California’s earned income tax credit

This credit is available to California residents and households based on you federal adjusted gross income (AGI). The credit opportunities are organized into three sections, and each has its own maximum credit:

  • If your AGI is less than $6,718 and there are no qualifying children, you qualify for a maximum credit of $217.
  • If your AGI is less than $10,088, and if there is one qualifying child, you qualify for a maximum credit of $1,452.
  • If your AGI is less than $14,162, and if there are two or more qualifying children, you qualify for a maximum credit of $2,706.

 

Additionally, the California Franchise Tax Board tells us that in order to qualify for the earned income tax credit, “Your investment income, such as interest, dividends, royalties, and capital gains cannot exceed $3,471 for the entire tax year.”

Are you looking for a dependable advocate for your tax needs? Contact the tax specialists at Mendes Weed, LLP.

Christina Weed has worked with clients in San Francisco, the East Bay, and throughout the United States. As a licensed attorney with an LL.M. in Taxation from the University of San Diego, and a Bachelor’s Degree in Accountancy, Christina offers a unique combined focus on Trusts & EstatesTax LawTax Litigation, and Business Law. Christina is Chair of the Tax Section of the Contra Costa County Bar Association and is also a member of the Estate Planning Council Diablo Valley and the Tri-Valley Estate Planning Council.

Disclaimer: The tips and materials provided on this page are for informational purposes only, offered as public service. No information on this website should be considered legal advice or used as a substitute for legal advice. For legal advice, you should contact an attorney directly.

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