Taxes · Accounting

If you are a DE corporation qualified in CA, how do you deal with use tax?

Stefan Broda Partner Program Manager at Atlassian

March 11th, 2014

Hi all. This question goes to all who have filed taxes as a Delaware or other corporation and are qualified to do business in California. 

Technically, you are supposed to file use tax for any merchandise purchased out of state. How have you handled this in past CA tax fillings?

Hamid Farzaneh CEO and Co-Founder at Alea Labs, Inc.

March 11th, 2014

Stefan,

The owner/excecutive of the S-Corp is personnally liable if the company doesnt remit the taxes collected to the State.  I strongly recommend to tightly follow the rule. Just charge the customers and remit them to the state monthly or quarterly. 

Stefan Broda Partner Program Manager at Atlassian

March 11th, 2014

Thanks. and to be clear, use tax / sales tax needs to be paid both for:
  • Any sales made online to any customer of your corporation over the internet
  • On any purchases of merchandise your corporation made from any out of state seller who did not already charge you the CA sales tax

Correct?

Richard Rosen Founder of FastCall --​> #1 Phone Sales Productivity app in the Salesforce AppExchange

March 11th, 2014

These are sales taxes? When you say merchandise purchased.. you mean by clients purchasing your goods?

Not goods purchased by the Corp?

Richard Rosen Founder of FastCall --​> #1 Phone Sales Productivity app in the Salesforce AppExchange

March 11th, 2014

These are sales taxes? When you say merchandise purchased.. you mean by clients purchasing your goods?

Not goods purchased by the Corp?

Stefan Broda Partner Program Manager at Atlassian

March 11th, 2014

@Richard, Both
  • My startup that is qualified in CA sells anything physical over the internet --> I need to pay CA sales tax. CorrecT?
  • My startup that is qualified in CA buys any merchandise from US non-CA vendors over the internet -> I need to pay CA use tax for these items. 

Hamid Farzaneh CEO and Co-Founder at Alea Labs, Inc.

March 11th, 2014

Yes, to the first point, except if your customer is a foreign company and your ship your product outside of the US.

If you are buying products (components, etc.) to use in your product manufactured in CA (ie for resale), you should give your resale # to the vendor in CA or other states so as not to be charged for sales tax.

If you are buying product NOT for resale and if your vendor does not charge you for their state's sales tax, I believe that you have to pay the use tax (but I suggest you verify with a CPA).   

Hamid Farzaneh CEO and Co-Founder at Alea Labs, Inc.

March 11th, 2014

Yes, to the first point, except if your customer is a foreign company and your ship your product outside of the US.

If you are buying products (components, etc.) to use in your product manufactured in CA (ie for resale), you should give your resale # to the vendor in CA or other states so as not to be charged for sales tax.

If you are buying product NOT for resale and if your vendor does not charge you for their state's sales tax, I believe that you have to pay the use tax (but I suggest you verify with a CPA).