Annual Report 2011-2012
Total BOE Revenues Decrease
Fiscal year 2011-12 revenues totaled $52.5 billion. This amount is 2.4 percent lower than the $53.7 billion collected in 2010-11. Sales and use tax receipts, which totaled $42.5 billion in 2010-11, fell to $41.2 billion, a decrease of 3.1 percent.
Fire Prevention Fee
Assembly Bill x1 29 (Chapter 8, Statutes 2011) requires the BOE to annually assess and collect a fire prevention fee on each habitable structure on a parcel that is within a state responsibility area based upon information provided by the Department of Forestry and Fire Protection (CAL FIRE), which includes the appropriate name and address of each person liable for the fee and the amount of the fee to be assessed.
Local Revenue Fund 2011
Assembly Bill 118 (Chapter 40, Statutes of 2011) requires that the amount of revenues collected according to section 6051 and 6201 and attributable to a rate of 1.0625 percent are to be deposited in the State Treasury to the credit of the Local Revenue Fund, a continuously appropriated fund, and used exclusively for the purpose of public safety.
Delinquent Sales and Use Tax List Increases to 500 Taxpayers
Assembly Bill 1424 (Chapter 455, Statutes 2011) doubled, to over 500 names, on the public record list of the largest sales and use tax delinquencies owing more than $100,000. It also requires state agencies that issue licenses (including driver licenses), certificates, registrations, or permits to suspend, revoke, and/or refuse to issue such a license, certificate, registration or permit, when the taxpayer’s name appears on the Top 500 Largest Delinquent Sales and Use Tax List. The list change became effective January 1, 2012 and the permit refusal/suspension change became effective July 1, 2012.
Retailer Engaged in Business in this State
Assembly Bill 155 (Chapter 313, Statutes 2011) revises the definition of a retailer engaged in business in this state to include but not be limited to an out-of-state retailer that:
- Has an affiliate operating in California that refers potential customers to the retailer, by an Internet-based link, Internet website, or otherwise, or
- Is a member of a commonly-controlled group and combined reporting group and has a member of the retailer’s commonly-controlled group and combined reporting group performing services for the retailer in California that help the retailer establish or maintain a California market for sales of tangible personal property.
- Maintains, occupies, or uses a place of business in California, has persons operating in California under its authority for the purpose of selling, delivering, installing, assembling, or the taking of orders for tangible personal property, or derives rentals from a lease of tangible personal property situated in California.
Transactions (Sales) and Use Tax Rate Decreased to Multiples of 0.125
Assembly Bill 686 (Chapter 176, Statutes 2011) decreases the rate at which a city or county may levy, increase, or extend a transaction (sales) and use tax to a rate of 0.125 percent, or multiples of 0.125 percent (formerly 0.25 percent or multiples of 0.25 percent), for general and special purposes.
AIDS/HIV Thrift Store Exemption
Assembly Bill 289 (Chapter 289, Statutes 2011) extends, until January 1, 2019, the sales and use tax exemption for sales of used clothing, household items, or other retail merchandise by thrift stores operated for the purposes of raising funds to provide medical, hospice, or social services for individuals with AIDS or HIV. The exemption was scheduled to sunset on January 1, 2012.
IMPROVING TAXPAYER EDUCATION
BOE ePay Helps Customers on the Go
The BOE created a new video to raise awareness about BOE ePay, a new application for mobile devices. BOE ePay allows owners of most mobile devices to use the application to make payments to their BOE tax and fee accounts and provides a fast, easy, safe, and convenient new way to do business. The exciting and interactive video has been viewed nearly 800 times since it was created.
eReg Education Campaign a Success
In June 2012, the BOE coordinated a successful campaign to promote our new electronic registration system (eReg). Using social media, news releases, a special web page, videos, and traditional outreach methods, the BOE ensured that the news about the launch of eReg reached many of BOE’s traditional partners and entrepreneurs starting a business. BOE worked hard to inform customers that “Doing Business Just Got Easier with eReg.”
BOE Educates the Public about Use Tax
The BOE continued to reach out to educate the public about use tax reporting requirements. BOE co-produced a tax tip video with the Franchise Tax Board (FTB), issued news releases educating the media and the public about use tax, and used social media to spread understanding about the Use Tax Lookup Table.
Raising Public Awareness of the Underground Economy
With the state’s current economy, collecting any portion of the estimated $8 billion in revenue lost per year to the underground economy becomes more critical than ever. To bring public awareness to the problem of the underground economy, the BOE developed a number of educational materials for agency partners, issued news releases, used social media, and hosted two successful news events that resulted in significant media coverage.
MAXIMIZING Tax Compliance
New Technology Speeds Up Services for Business Owners
With the February 27, 2012 opening of the new BOE office in North San Diego, which consolidated the downtown San Diego and San Marcos offices, the BOE introduced its latest in innovative technology. This new technology includes self-service kiosks that enable taxpayers to use many of our online services and an automated self check-in program. All field offices have now upgraded to the self-service kiosks and, as opportunities occur for upgrades, BOE will expand the automated self-check-in program in other field offices.
Digital Audits Improve Audit Efficiencies
The BOE, continuing to use only existing resources, converted its entire audit program to digital audits in fiscal year 2011-12. Audit reports are no longer printed and are now managed, tracked, and processed electronically. The conversion to digital audits benefits taxpayers through improving efficiency in audit processing and providing the ability to receive electronic audit reports.
Computer Audit Specialists Improve Accuracy and Efficiency
The BOE utilizes 18 active Computer Audit Specialists (CAS) responsible for requesting, processing, and statistically analyzing the electronic data on more than 775 of the largest and most complex audit assignments during fiscal year 2011-12. The work of the CAS dramatically improves the accuracy and efficiency of these audits. The CAS staff assists taxpayers by reducing the workload of the audit staff during the audit process, while focusing on areas of importance and materiality. The CAS improves the accuracy of the audit findings, reducing the need for taxpayers to appeal their audit findings.
Use Tax Webpage Enhanced with Digital Statistics
The BOE added the annual Use Tax Statistics to the California Use Tax Information webpage. These statistics show annual use tax collected from various sources. The use tax webpage continues to offer a choice of use tax topics such as Use Tax Basics, Filing a Return, and Resources to help the taxpayers and other online users to quickly find the information they are seeking.
Online Services Expanded
The BOE is continually improving our online services to enhance our taxpayers’ experience. Our eServices capabilities continue to expand for our customers in the following areas:
- eReg (Electronic Registration)–In June 2012, the BOE implemented its eReg system. eReg is a convenient, fast, and free way to register for a permit, license, or account online with the BOE. During the eReg process, taxpayers answer questions pertaining to their business operations. Based upon the information furnished, the eReg system identifies and validates the type of permit, license and account necessary. Once completed, the taxpayer is issued the necessary permits or licenses which can be printed immediately, or at a later date if desired.
- Mobile Apps– The BOE now has two mobile apps (BOE and BOE ePay) to help better serve its customers.
- The BOE application enables mobile users to find the closest BOE office or verify a permit.
- The BOE ePay app is a streamlined way to manage electronic payments and user account details on a mobile device. The user can log in either with an eClient ID or an Express Login code.
During the year, staff held informal meetings with interested parties and stakeholders to discuss proposed changes to the following regulations:
- Regulation 1618, United States Government Supply Contracts
- Regulation 1684, Collection of Use Tax by Retailers
- Regulation 1685.5, Calculation of Estimated Use Tax–Use Tax Table
Expanded Training for Appraisers at the BOE and in County Assessor’s Offices
Training for appraisers expanded by implementation of the following online training:
- BOE developed and successfully implemented an online training program where instruction is provided through structured reading and illustrated examples; combined with students performing exercises at the end of each lesson.
- Self-paced online learning sessions were completed on two topics—the use of Assessors’ Handbook Section 505, Capitalization Formulas and Tables, and Assessors’ Handbook Section 581, Equipment and Fixtures Index, Percent Good and Valuation Factors.
UPDAting Tax Gap Programs
Tax Gap Efforts Are Effective
During fiscal year 2011-12, the BOE continued its efforts to close the tax gap (the difference between sales and use tax revenue due under the existing laws and the actual amount that is reported and paid) through the continuation of the programs described below. These programs included education, outreach, and other efforts to promote voluntary compliance, as well as an enforcement component. Through these programs, voluntary compliance improved, revenues increased, and BOE continues to level the playing field for California businesses.
The sales and use tax gap programs included:
Qualified Purchaser—"Qualified Purchasers" are required to register with the BOE and report
all purchases subject to use tax as a result of the addition of Revenue and Taxation Code section 6225 by Assembly Bill x4 18
(Chapter 16, Statutes 2009).
At the July 2011 Board meeting, the Board approved significant changes to the administration of the Qualified Purchaser program resulting in approximately 348,000 accounts being closed. The BOE successfully closed out these accounts and also assisted approximately 75,000 taxpayers with active accounts to efile their delinquent use tax returns. For the fiscal year 2011-12, the program generated $51.3 million in revenue, which was an increase of $2.7 million from the prior fiscal year.
In-State Service Business —The In-State Service Business Program uses information from the
Employment Development Department (EDD)
to identify specified service businesses that may be purchasing items subject to use tax and works with
these businesses to ensure proper reporting.
In fiscal year 2011-12, the program sent 9,254 new contact letters and identified 316 new audit leads. This program generated $37.9 million in revenue, which was an increase of $6.2 million from the prior fiscal year.
- U.S. Customs—The U.S. Customs Program reviews the Department of Homeland Security’s U.S. Customs
data for California destined purchases to pursue use tax collection on imported items.
This fiscal year, the program sent approximately 4,150 letters to businesses and generated $9.4 million in revenue, which was a decrease of $5 million from the prior fiscal year. This decrease in revenue, in part, is attributable to outreach efforts where taxpayers are notified of their responsibility to self-report use tax. This outreach contributed to an increase in taxpayers self-reporting use tax on their FTB returns.
- Agricultural Inspection Stations—The Agricultural Inspection Program is a partnership between the
BOE and the California Department of Food and Agriculture (CDFA).
The BOE receives information from CDFA stations located in Needles, Hornbrook, Truckee, and Yermo on trucks entering California.
This information is used to issue sales and use tax permits to those that need them, contact taxpayers for outreach and
education on use tax, and identify activities that may warrant further investigations.
BOE staff reviewed 102,016 leads during this fiscal year and the program generated $36 million in revenue, which is an increase of $16.7 million from the prior fiscal year.
Statewide Compliance and Outreach Program—The Statewide Compliance and Outreach Program (SCOP)
had seven teams located throughout the state during 2011-12. The teams conducted door-to-door visits and also
had telephone contact with nonresidential businesses to verify whether or not each of these businesses held the
applicable permits and licenses required by the BOE. In addition, during these visits and contacts, the SCOP
team members answered questions and helped taxpayers to better understand their sales and use tax reporting obligations.
During the fiscal year, SCOP team members visited or contacted 90,732 retail and service businesses. Of those businesses, 2,080, or approximately 2.3 percent, were found to be operating without a valid seller’s permit. In addition, 2,158 sublocation permits were also issued to businesses with existing permits during 2011-12. SCOP generated approximately $84 million in revenue, exceeding revenue estimates by $27 million.
- Collection Program Enhancement—The continued economic downturn contributed to an increase in the number of sales and use tax accounts with past due liabilities. Approved as part of the 2010 Budget Act, the Collection Program Enhancement element of the Enhancing Tax Compliance (ETC) proposal provided the resources necessary for the BOE to pursue collections on the increasing number of accounts receivable. In fiscal year 2011-12, this element generated revenue of $41.2 million, an increase of $26.5 million from the prior fiscal year.