If you’re a brick-and-mortar retailer or an ecommerce merchant doing business in California, you might become a sales tax outlaw in 2013. The means and methods the CA Board of Equalization (BOE) will utilize in 2013 to collect more sales tax range from additional auditors to higher tax rates to behavioral science. To gear up and get ready, keep reading…

California, the canary in the coal mine of states desperate for cash, is entering a new phase of sales tax compliance and oversight. The BOE has updated to 500 its list of sales tax delinquents (the largest amount owed is over $18 billion dollars), including the names and addresses of business owners. This public shaming signals increased efforts by the BOE to recover recondite revenue. Other efforts include behavioral science methodologies ranging from simple, clear language, explaining negative consequences, to the “everyone else is in compliance” approach. While the latter method seems more teen peer pressure than tax auditor (“Everyone else is doing it, why shouldn’t you?”) many businesses will feel the heat in 2013.

If public shaming (the Scarlet “T” for “tax delinquent?”) and peer pressure don’t work, more auditors might. An additional 100 auditors will be hired over the next three years to enforce a new rule requiring certain online retailers to collect sales tax. This expansion signifies a growing commitment to capture more sales tax revenue, especially in light of an estimated $2.7 billion dollar state budget deficit.

But it’s not only remote sellers that are being targeted. Teams of auditors from the California BOE will visit over 7,800 businesses throughout the Los Angeles and San Francisco areas to help ensure that businesses are in compliance with California tax law. Businesses will receive notification letters by mail alerting them to a potential visit. (If you’re found out of compliance, don’t forget to call us –we can help!). This is part of a larger effort by the BOE to “. . . visit all non-residential businesses statewide over the course of time.”

In addition to a surge in compliance and enforcement efforts, California will increase the sales tax rate by one quarter of one percent (0.25%), resulting in overall tax rates within the state of 7 to 10% in 2013.

California is certainly not the only state to step up its efforts to capture delinquent sales tax. Smart businesses that want to keep growing in 2013 will arm themselves so they can be ready for the inevitable increases in scrutiny and compliance. They also know that it doesn’t pay to be an outlaw. So call us, we’re here to help: 206-826-4900.

Photo Credit: Caveon