The California State Board of Equalization (BOE) is the state bureau responsible for administering sales tax collections. It has long been their practice to “automatically” collect a security deposit from new businesses applying for a Seller’s Permit.
The amount? Typically a half year’s worth of taxes, ranging from $2,000 to $50,000 per company. This is a truly significant impediment for many entrepreneurs trying to start a new company.
The good news: on December 17, the BOE voted to eliminate the burdensome security requirements for new businesses, drawing praise from the California Chamber of Commerce, which noted that these types of deposits are typically not required in other states.
In addition, the BOE will be reviewing and releasing much of the security currently held in the form of cash and liquid deposits, surety bonds, and personal guarantees. The board will continue to request security deposits from accounts with a history of nonpayment or those that comprise a high compliance risk, which seems reasonable and fair. The state currently holds security belonging to more than 15,000 taxpayers, valued at nearly $300 million. The BOE expects more than half of this amount will be released to taxpayers, boosting California’s economy and jobs.
The information presented is not intended to be, and does not constitute, “legal advice.” Because each situation varies, and only brief summary information is provided here, you should not use this information as a basis for action unless you have independently verified with your own counsel that it applies to your particular situation.
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