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I have a business in Florida that sells items on the internet to all states including California. I rent warehouse space in California where my inventory is stored. I just learned I may owe California tax, is this true? What if I stopped using the warehouse?

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Tax Professional Answers

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Betty Williams
If you stopped using the warehouse in California and did not have a physical presence in California, Public Law 86-272 may help you with regard to California income tax. Public Law 86-272 generally prohibits a state from imposing a net income tax if a company's only state activities are the solicitation of orders for sales of tangible personal property which are sent outside the state for approval or rejection and are filled from outside the state. If you have not yet been contacted by the California Franchise Tax Board (FTB) or Board of Equalization (BOE), you may qualify to participate in one or both of these agencies’ voluntary disclosure programs which may limit the years you have to address to become compliant and may also limit your penalties.
Leave a Comment 160 weeks ago

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James Kronenberg
Just clarifying Betty's excellent advice provided earlier, the FTB handles income tax related issues while the BOE handles sales tax matters so both agencies have jurisdiction over your situation.
Reply 160 weeks ago
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James Sutton, CPA, Esq
That CA warehouse would also require you to collect and remit sales tax if what you sell is subject to CA sales tax. Even if you did not collect it, your business would still be liable for the tax. Also pay attention to the Marketplace Fairness Act in federal congress, which could make you liable for tax in 45 states.
Leave a Comment 119 weeks ago

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