Administering the Sales and Use Tax Laws

Division 2, Part 1, Chapter 8 of the Revenue and Taxation Code deals with administration of the California Sales and Use Tax Law.

Section 7051 requires the board to enforce the provisions of this part and may prescribe, adopt, and enforce rules and regulations relating to the administration and enforcement of this part.

Section 7051.1 authorizes the board to adopt rules and regulations which provide for the issuance of a permit to a person who holds a valid seller’s permit which allows the purchase of tangible personal property without payment by the retailer of the tax imposed under this part and any reimbursement of the sales tax to the retailer by that person, if all of the five specified conditions are met.

Section 7051.2 provides that, if a holder of a direct payment permit issued by the board gives an exemption certificate to a retailer for the purpose of paying that retailer’s tax liability to the board, and fails or refuses to pay that retailer’s tax liability to the board on a timely basis, then in addition to that retailer’s tax liability, the direct payment permitholder is subject to the same penalty provisions that would apply if that permit holder was the retailer.

If a holder of a direct payment permit issued by the board does not properly allocate a retailer’s local sales and use tax liability, or that retailer’s district transactions and use tax liability to the cities, counties, city and county, redevelopment agencies, and districts to which those taxes would have been allocated if properly reported by that retailer, then the direct payment permitholder is liable to the state for a penalty of 10 percent of the amount of that retailer’s tax liability not properly allocated by the direct payment permitholder for improper allocation due to negligence or intentional disregard of the law.

Section 7051.3 defines the term “use tax direct payment permit.” Every person seeking to pay use taxes directly to the board is required to file an application for a use tax direct payment permit. An application for a use tax direct payment permit must be made upon a form prescribed by the board and set forth specified information. A use tax direct payment permit is to be issued to any person who meets all of the specified conditions.

Section 7051.5 requires the board to prescribe rules and regulations respecting retail grocers who sell both taxable items and exempt food items to provide one or more methods whereby they may report their sales tax liabilities in as simplified a manner as is consistent with law.

Section 7052 allows the board to employ accountants, auditors, investigators, assistants, and clerks necessary for the efficient administration of this part and may designate representatives to conduct hearings, prescribe regulations, or perform any other duties imposed by this part or other laws of this State upon the board.

Section 7053 states that every seller, every retailer, and every person storing, using, or otherwise consuming in this State tangible personal property purchased from a retailer must keep records, receipts, invoices, and other pertinent papers in such form as the board may require.

Section 7054 explains that the board or any person authorized in writing by it may examine the books, papers, records, and equipment of any person selling tangible personal property and any person liable for the use tax and may investigate the character of the business of the person in order to verify the accuracy of any return made, or, if no return is made by the person, to ascertain and determine the amount required to be paid.

Section 7055 allows the board to require the filing of reports by any person or class of persons having in his or their possession or custody information relating to sales of tangible personal property the storage, use, or other consumption of which is subject to the tax.

Section 7056 explains that the information set forth on certificates of registration and the terms of any settlement are confidential, and any person having an administrative duty under this part or any person who obtains access to information contained in, or derived from, sales or transactions and use tax records of the board, cannot make known in any manner whatever the business affairs, operations, or any other information pertaining to any retailer or any other person required to report to the board or pay a tax, or the amount or source of income, profits, losses, expenditures, or any particular thereof, set forth or disclosed in any return, or to permit any return or copy thereof or any book containing any abstract or particulars thereof to be seen or examined by any person.

It is also unlawful for any person, other than an officer or employee of a county, city and county, city, or district, who obtains access to information contained in, or derived from, sales or transactions and use tax records of the board to retain that information after that person’s contract with the county, city and county, city, or district has expired.

Section 7056.5 provides that the information furnished or secured pursuant to this part must be used solely for the purpose of administering the tax laws or other laws administered by the person or agency obtaining it. Any willful unauthorized inspection or unwarranted disclosure or use of the information by the person or agency, or the employees and officers thereof, is a misdemeanor. The term “inspection” is defined. The board is required to notify a taxpayer of any known incidents of willful unauthorized inspection or unwarranted disclosure or use of the taxpayer’s confidential tax records, but only if criminal charges have been filed for the willful unauthorized inspection or unwarranted disclosure.

Section 7056.6 provides that any person who is engaged in the business of preparing, or providing services in connection with the preparation of, returns, and who knowingly or recklessly does either of two specified acts, is guilty of a misdemeanor,

Section 7057 authorizes the board to disclose to state governmental licensing entities identifying information of persons appearing on the list of the 500 largest tax delinquencies. The term “identifying information” is defined. Neither the state governmental licensing entity, nor any officer, employee, or agent, or former officer, employee, or agent of a state governmental licensing entity, may disclose or use any information obtained from the board generally or to inform the public of the denial, refusal to renew, or suspension of a license or the issuance of a temporary license.

Section 7057.5 allows the board to disclose to state agencies identifying information of persons appearing on the list of the 500 largest tax delinquencies. The term “identifying information” is defined. A state agency, and any officer, employee, or agent, or former officer, employee, or agent of a state agency, cannot disclose or use any information obtained from the board as a general rule.

Section 7058 states that a certificate by the board or an employee of the board stating that a notice required by this part was given by mailing or personal service is prima facie evidence in any administrative or judicial proceeding of the fact and regularity of the mailing or personal service in accordance with any requirement of this part for the giving of a notice. Unless otherwise specifically required, any notice provided by this part to be mailed or served may be given either by mailing or by personal service in the manner provided for giving notice of a deficiency determination.

Section 7060 allows the board to establish a reward program for information resulting in the identification of underreported or unreported taxes due under this part. Any reward may not exceed 10 percent of the taxes collected as a result of the information provided. Any person employed by or under contract with any state or federal tax collection agency cannot be eligible for a reward provided pursuant to this section.