Tax & Accounting Blog

Whopping $1.4 Billion Owed to California

Indirect Tax, Tax Automation October 7, 2010

The $1.4 billion owed to California by merchants would be a good start to closing the $19 billion budget gap the state is facing. Consumer’s have been charged and paid these sales and use taxes for the most part, but the money has not been remitted to the state. This often occurs when businesses are going under and are unable or unwilling to remit sales taxes to the state.

Additional resources, including more California tax collectors and new computer systems, would be needed for the state to more aggressively collect the taxes it is owed.

Another solution that has been proposed is a daily remittance of sales taxes for purchases of cars, as car dealers appear to be the biggest problem. Merchants collect sales taxes on a daily basis, while they remit them on a monthly or quarterly basis. The idea would be for sales tax to be remitted to DMV at the time of the registration of the car. In order for this to happen, DMV would need to upgrade their system.

I will continue to monitor this issue and post any updates as they become available.