Effective January 1, 2009, the State of California reinstated its In-State Voluntary Disclosure Program (“Program”) under Revenue and Taxation Code, Section 6487.06, which had previously expired on December 31, 2007. The Program applies to in-state purchasers that are not required to hold a seller’s permit but have a use tax liability. A use tax liability generally arises when a person or business in California purchases taxable tangible merchandise from a retailer located outside of the state and who does not collect California tax on the sale. Purchased items are considered taxable when they will be used, consumed, given away, or stored in the state.
The Program, which is administered by the State Board of Equalization (BOE), provides the benefits of limiting the time the BOE can make an assessment for prior years to three years (without this section, the applicable statutory period could be a long as ten years) and allows the BOE to waive late filing and late payment penalties.
To qualify for the Program, a person or business must meet all of the following conditions:
- resides or is located in California, and has not previously registered with the BOE;
- has not previously filed an Individual Use Tax Return with the BOE;
- has not reported an amount for use tax on an Individual Income Tax Return with the Franchise Tax Board;
- is not engaged in business in California as a retailer;
- has not been contacted by the BOE for failure to report use tax;
- the purchase is not of a vehicle, vessel, or aircraft; and
- the person or business voluntarily comes forward to the BOE.
The BOE is actively pursuing use tax liabilities from consumers and businesses through a variety of programs. Consumers and businesses with use tax liabilities are encouraged to apply for the Program before being contacted by the BOE. Once a person is contacted by the BOE regarding an unpaid use tax liability, that person or business is no longer eligible for participation in the Program.