Just a reminder that California’s sales tax rates changed on July 1, 2006. You can get current city and county sales tax rates at the Board of Equalization’s (BOE) website: http://www.boe.ca.gov/cgi-bin/rates.cgi.

Before we get into specifics, here are some resources that may be helpful:

Sales tax classes offered by the BOE.
Online tutorial about BOE sales tax.

You gotta do it, but complying with California’s sales tax rules can be maddeningly expensive:

• The rates change not infrequently
• They vary by city and county
• The rules are nuanced at best, arcane at worst
• It’s difficult to find modestly priced CA sales tax consultant-experts
• The BOE representatives sometimes give contradictory and even incorrect interpretations of their department’s own rules and regulations

Nevertheless, if your business has to collect and remit CA sales tax, here are a few things you can do to minimize the damage:

1. If you’re using QuickBooks to track sales tax, make sure it’s set up right from the beginning and don’t let it become inaccurate. Cleaning up sales tax problems after the fact is a lot more expensive than doing it right in the first place.
2. Don’t fudge how you record revenues to make a sale that should be subject to sales tax look like it’s not. It’s not worth the audit risk.
3. Similarly, don’t fudge the invoice date to defer paying sales tax. In California you pay sales tax on an accrual basis, regardless of whether your customer has paid you yet. So be smart about collections and customer terms, get prepayment up front where possible, but don’t push back the date of an invoice to defer the sales tax payment until another period. This will cause more trouble than it’s worth: revenues and expenses won’t match to the same period so your management data will be off, and if you’re audited by the IRS or in a buy/sell transaction, you’ll have a lot of explaining to do.
4. The bigger the dollars are, the more it’s worth investing to make sure you’re in full compliance.
5. The first few times you call the BOE about your particular situation, consider calling anonymously.
6. When you sign up for a California reseller’s permit to initiate your account, know that all other things being equal, the higher you tell them your sales are likely to be, the more frequently they’ll make you report and pay sales tax. So when getting your permit, it’s better to estimate at the low end of reasonableness.
7. Request a written determination by the BOE if you’re concerned about a high dollar, particularly ambiguous type of treatment.
8. If at some point during a sales tax problem reconciliation in the books you just have to say, “Good enough” and move on, err on the side of the BOE, and leave a decent paper trail so if you have to pick up your work in a few years during an audit, it’s easier to do so.