Skip Navigation or Skip to Content
Tax

Small Businesses Get Additional Sales and Use Tax Relief

This article is reproduced with permission from Spidell Publishing, Inc.

As part of California’s efforts to assist businesses struggling with the economic impacts of COVID-19, businesses with less than $5 million in annual taxable sales for the 2019 calendar year may defer payment of up to $50,000 in sales and use tax liability without incurring any penalties or interest. Under the program, eligible businesses will make up to 12 monthly payments toward their deferred payment obligation. At this time, payments for returns originally due in March through July 2020 are eligible for the interest-free payment arrangement. All payments must be completed within 12 months from the inception of the agreement, meaning under this program the last installment payment must be made in July 2021. This monthly payment will be in addition to any tax due above the $50,000 tax deferred.

For example, Pay to Play, Inc. owes $50,000 in sales and use taxes for the second quarter of 2020. Pay to Play may enter into an agreement and pay $4,167 ($50,000 ÷ 12) per month starting July 31, 2020, until July 31, 2021.

What if You Owe Less Than $50,000?

Taxpayers who initially sign up for the program when they owe less than $50,000 can continue to add taxes to their deferral period until they reach the $50,000 cap. Because all payments must be completed within 12 months from the inception of the agreement, if additional amounts are added at later dates, these additional amounts must be paid back over a shorter period of time.

Here is the example for adding to deferral period. Resilience, Inc. starts a payment plan on July 31, 2020, for $20,000 for their first quarter tax due. Their first payment in the amount of $1,667 ($20,000 ÷ 12) is made in August. On October 31, 2020, Resilience adds an additional $10,000 to the payment plan. The payment amount will be recalculated to reflect the new monthly payment, but the length of the plan will not change. This means Resilience must add an additional $1,111 ($10,000 ÷ 9) to its monthly payment to bring its total monthly payment to $2,778.

The total amount that may be deferred in aggregate is $50,000, so in the prior example, if Resilience brings its tax liability down below $50,000, it cannot add additional tax to bring its deferred amount up to $50,000.

How to Sign Up

The California Department of Tax and Fee Administration (CDTFA) is still in the process of reconfiguring their systems to launch this program. Interested taxpayers may go to the following website to sign up to be notified when the program is available:
www.cdtfa.ca.gov/services/covid19.htm#small-business-payment

Alternatively, taxpayers may contact the CDTFA customer service center if they are interested in being notified: (800) 400-7115

CDTFA Also Extends Filing and Payment Deadlines for Most Taxpayers

The CDTFA is extending the deadline for first quarter returns and payments to July 31, 2020, for any business filing a return for less than $1 million in tax. Previously, the CDTFA had granted an extension for all taxpayers to May 11, 2020.

For more information about this article, please contact our tax professionals at taxalerts@windes.com or toll free at 844.4WINDES (844.494.6337).

Windes.com
Payments Online TaxCaddy
Secure File Transfer Windes Portal