California sales tax debt: CDTFA payment plans, compromise and appeals

A common mistake is calling the Franchise Tax Board about a sales tax bill. The FTB handles income and franchise tax; sales and use tax belongs to the CDTFA. The statewide base rate is 7.25%, and voter-approved district taxes push the combined rate higher in many cities, so a single seller can owe at several rates depending on where goods were delivered.

If CDTFA issues a Notice of Determination or a Demand for Immediate Payment, the amount is due by the date on the bill. CDTFA's collection publication (Publication 54) explains that it can take collection and enforcement action if you don't pay or make arrangements, including liens, levies on bank accounts and receivables, and in serious cases action against your seller's permit. Penalties and interest continue to accrue until the balance is paid.

CDTFA lets most taxpayers with a past-due amount request a payment plan through its online services. You can't apply online if the account is in bankruptcy, probate or receivership, or if you already have a pending or existing plan. CDTFA notes a plan can save additional penalties and interest compared with letting collection proceed. Keep filing and paying current returns: a new balance usually defaults the plan.

CDTFA's Offer in Compromise program lets a taxpayer pay less than the full liability, but the qualifying criteria are narrow. Per CDTFA, you generally must have a final liability on a closed account, be no longer associated with the business or a similar business, and lack the income, assets or means to pay now or in the foreseeable future. CDTFA generally accepts an offer when it exceeds what it could expect to collect within about four years. Operating businesses should contact CDTFA's OIC Section directly; the online pre-qualifier tool is built for closed businesses.

California law (Revenue and Taxation Code section 6829) lets CDTFA hold responsible persons of a terminated corporation or LLC personally liable for unpaid sales tax when they willfully failed to pay — similar to the federal Trust Fund Recovery Penalty.

To dispute a determination, file a petition for redetermination with CDTFA by the deadline on the notice; unresolved cases can go to the independent Office of Tax Appeals. Missing the petition deadline generally means paying first and claiming a refund.