The California Department of Tax and Fee Administration (CDTFA) has extended their Small Business Tax Relief Payment Plan for Sales and Use Tax. Small businesses with less than $5 million in taxable annual sales and a maximum of $50,000 in sales and use taxes due will be able to setup a monthly payment plan and avoid interest and penalties. The tax liability will have to be paid off in 12 or fewer months.
CDTFA has allowed businesses operating in sectors hit hardest by operational restrictions due to COVID-19 and with over $5 million in annual taxable sales the ability to apply for this program.
This became effective December 15, 2020 and applies to sales and use tax returns due between December 15, 2020 and April 30, 2021. This program looks exactly like the previous Tax Relief Payment Plan that expired recently but pertained to a previous period.
Anyone considering this tax relief payment plan must be aware of issues that can disqualify an application. Some of the more common ones are:
1. Revoked seller's permit
2. Currently in active tax collections
4. Currently in an Offer in Compromise (OIC)
Qualifying businesses should consider taking advantage of this program even if they have the means to pay their tax liability in full. The future economic and business environment remains uncertain during the pandemic. Being able to defer sales and use tax liability payments will allow companies to better manage their cash flow, avoid a cash crunch and stay in business.
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