COVID-19 sales tax relief in California
With more than 2.9 million confirmed cases of COVID-19 to date, California has been profoundly impacted by the pandemic. Though the vaccine is a positive turn, economic recovery has slowed due to a statewide Limited Stay at Home Order and various regional stay-at-home orders. Many individuals and businesses in the state need more relief.
Fortunately, a variety of state tax relief measures are available.
Filing and payment extension for small businesses
The California Department of Tax and Fee Administration (CDTFA) is providing an automatic three-month filing and payment extension for individuals and businesses reporting less than $1 million in taxes and fees on a return originally due between December 15, 2020, and April 30, 2021. Interest and penalties won’t accrue provided payments are made and returns are filed within three months of the original due date.
Relief may also be available for taxpayers with liability exceeding $1 million. However, it will be granted on a case-by-case basis only, upon request.
Approximately 99.5% of businesses typically file returns for less than $1 million in tax in California, and these 4.1 million small businesses employ roughly 7.2 million people. Many of these businesses have been eligible for several tax filing and payment extensions since the start of the pandemic. As of November 30, 2020, “some 9,287 plans with almost $149 million in tax relief” had been issued.
A list of extension due dates for all state business taxes and fees is available on the CDTFA website at COVID-19 Extensions to File and Pay.
Sales tax payment plan for small businesses
For sales and use tax originally due between December 15, 2020, and April 30, 2021, business taxpayers with less than $5 million in annual taxable sales are eligible for a 12-month, interest-free payment plan for up to $50,000 of sales and use tax liability. The zero-interest payment plans will be granted to taxpayers who pay in full by April 30, 2022.
This is the second such plan offered by California, and participation in the first small business relief payment plan does not disqualify businesses from applying for the second payment plan. Full payment on the initial payment plan is due by July 31, 2021. The payment plan is not automatically granted; requests must be made through the CDTFA online services system.
The 12-month, interest-free payment plan may also be available to larger businesses, especially those impacted by operational restrictions.
Main Street Small Business Tax Credit
Qualified small business owners able to act fast may reserve up to a $100,000 hiring tax credit. The application period closes at the end of January 15, 2021, and the tentative credit reservation is available on a first-come, first-serve basis. Additional information.
For information about COVID-19 tax relief programs in other states and countries, see our COVID-19 tax info hub for business recovery.
The 2021 sales tax changes report: midyear update
Your guide to navigating the complicated world of tax compliance and preparing for the future
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