We know times are crazy, but there are a lot of important updates for CA sales tax you need to know. Please read highlights from CDTFA below.
Relief and Extensions for Filing Returns
For all but the largest taxpayers, first quarter 2020 returns were extended and are now due July 31, 2020. For all but the largest taxpayers, monthly returns for March, April, and May 2020 were also extended by three months. Tax returns for the second quarter, running from April through June 2020, remain due on July 31, 2020. For sales and use taxpayers required to make monthly prepayments against their second quarter sales and use tax obligations, prepayments remain due on May 26, 2020, and June 24, 2020. For annual filers scheduled to file returns in July, the filing deadline of July 31, 2020, remains in effect. For taxpayers who are unable to meet these deadlines through July 31, 2020, however, relief remains available. For taxpayers reporting less than $1 million in tax on a return originally due through July 31, 2020, interest and penalties will not accrue on return amounts due, provided payments are made and returns are filed within three months of the original due date. Taxpayers below the $1 million threshold are not required to seek an extension from CDTFA; relief will be provided automatically.
Requesting an Extension or Relief from Penalty or Interest over $1 Million in Tax Due
Taxpayers with a liability greater than $1 million who are in need of additional time to file and/or pay may request an extension. These extension requests will be evaluated on a case-by-case basis. When making a request for an extension, you should provide information about how your business is unable to file and pay timely due to COVID-19. Request for relief from penalties or interest may be submitted through our online services. Please note that you must log in to our online services using your username and password to request an extension or relief. If you do not already have a username and password, you may Sign Up Now at https://onlineservices.cdtfa.ca.gov/_/.Small Business Relief Payment Plan The CDTFA is offering a 12-month, interest-free, payment plan for small businesses with less than $5 million in annual taxable sales. This payment plan is limited to sales and use tax accounts and is available for up to $50,000 in tax liability. All payment plans must be paid in full by July 31, 2021, to qualify for zero interest. We are still working on configuring our systems to accommodate this interest-free payment plan. Please complete this form and we will notify you when the system becomes available. Please see our website at www.cdtfa.ca.gov/services/covid19.htm#small-business-payment.
Extension of Time to File Appeal with Office of Tax Appeals
Taxpayers or fee payers disputing a tax or fee liability may request their appeal be heard by the Office of Tax Appeals. Taxpayers typically have a 30-day window in which they may request an appeal with the Office of Tax Appeals. Through July 31, 2020, this period has been extended by 60 days, therefore, taxpayers now have a 90-day period to request an appeal with the Office of Tax Appeals.
RATE CHANGES BY DISTRICT – New Sales and Use Tax Rates Operative July 1, 2020
RESTAURANTS / BARS
Your hot prepared food products when sold to-go are generally subject to tax. Separate charges for hot bakery items and hot beverages, such as hot baked pretzels or coffee, are an exception to this rule. When they are sold to-go, tax does not apply. Cold prepared food products are usually not taxable when sold to-go unless all your sales are taxable under the 80-80 rule (see www.cdtfa.ca.gov/lawguides/vol1/sutr/1603.html).
If you deliver your restaurant’s food, tax may apply to the delivery fees you charge. For example, hot prepared food is taxable along with any related delivery charges. However, if the prepared food is not taxable, such as cold sandwiches, the delivery charge is also not taxable. If you sell a combination of hot and cold food items for a single price, the entire price is subject to tax including any delivery fee charged.
All sales of alcoholic beverages are taxable. Aside from a seller’s permit, you may also be required to hold specific types of ABC licenses for the alcoholic beverages you sell. For more information, please visit the Alcoholic Beverage Control website at www.abc.ca.gov.
Online Food Ordering Service
It is important for restaurants and online ordering service providers to know which party is liable for the sales tax on the sales of meals. The following provides both parties a better understanding of their responsibilities.
What is the relationship between the restaurant and the online ordering service
A written agreement should be completed that clearly states whether the online ordering service provider is acting as an agent of the restaurant in the advertising, ordering, and delivery of the meals, or whether the online ordering service provider is purchasing the meals for resale.
If the online ordering service provider is acting as an agent for the restaurant:
• The restaurant is considered the retailer of the meals sold through the online ordering service.
• The restaurant is liable for the tax measured by the full selling price of the meals, without a deduction for the commission retained by the service provider.
• Generally, tax does not apply to separately stated service fees charged by the online ordering services.
• Please note: Beginning October 1, 2019, according to the Marketplace Facilitator Act, a marketplace facilitator is considered the retailer of the sales that it facilitates. Delivery network companies are not marketplace facilitators unless they elect to be deemed as such. It is important that the restaurant check with the online ordering service provider to determine if the application of tax is affected by the Marketplace Facilitator Act.
If the online ordering service provider is not acting as an agent for the restaurant or is purchasing the meals for resale:
- The online ordering service provider is considered the retailer of the meals sold through the online ordering service and is liable for the tax measured by the full selling price of meals, including any service charges.
- The online ordering service provider is required to hold a seller’s permit.
- The restaurant must obtain a valid resale certificate from the online service provider in a timely manner. For more information, please see publication 22, Dining and Beverage Industry at www.cdtfa.ca.gov/formspubs/pub22.pdf; publication 73, Your California Seller’s Permit at www.cdtfa.ca.gov/formspubs/pub73.pdf; publication 103,
Sales for Resale at www.cdtfa.ca.gov/formspubs/pub103/; and our Tax Guide for Marketplace Facilitator Act at www.cdtfa.ca.gov/industry/MPFAct.htm. New Sales and Use Tax Rates Operative July 1, 2020 The tax rate changes listed apply only within the indicated city or county limits. The new tax rates, tax codes, acronyms, and expiration dates will be available to view and download as a spreadsheet on our California City & County Sales & Use Tax Rates webpage. Go to our website at www.cdtfa.ca.gov, select Tax and Fee Rates, then choose Sales and Use Tax Rates (scroll down to Download for the spreadsheet). To find the specific tax rate for your area or business location, go to the California City & County Sales & Use Tax Rates webpage and select Find a Sales and Use Tax Rate by Address under the Current Tax Rates section. The new rates will be displayed on July 1, 2020. You may also call our Customer Service Center at 1-800-400-7115 (CRS:711). Customer service representatives are available to assist you Monday through Friday from 8:00 a.m. to 5:00 p.m. (Pacific time), except state holidays.
Cannabis Tax Updates
We are responsible for determining a cannabis mark-up rate every six months. Based on our analysis of statewide market data, we determined the cannabis mark-up rate will remain at 80 percent for the remainder of 2020.
The 15 percent cannabis excise tax is based on the average market price of the cannabis or cannabis products sold in a retail sale. The mark-up rate must be used by distributors to compute the average market price of cannabis or cannabis products sold or transferred to a cannabis retailer in an arm’s length transaction.
Current and historical cannabis tax rates are posted on our website on the Tax Rates – Special Taxes and Fees webpage under the Cannabis Taxes section at www.cdtfa.ca.gov/taxes-and-fees/tax-rates-stfd.htm.
New Tax Rate for Other Tobacco Products – Effective July 1, 2020,
through June 30, 2021
The new tax rate for other tobacco products (products other than cigarettes) is 56.93 percent of wholesale cost, effective July 1, 2020, through June 30, 2021, and is subject to change annually.
For more information, please see our special notice, New Tax Rate on Other Tobacco Products Effective July 1, 2020, through June 30, 2021, at www.cdtfa.ca.gov/taxes-and-fees/L747.pdf. Current and historical tobacco products tax rates are posted on our website on the Tax Rates – Special Taxes and Fees webpage under the Cigarette and Tobacco Products Tax section at www.cdtfa.ca.gov/taxes-and-fees/tax-rates-stfd.htm.