Sales Tax Solutions 2000

You are required to keep complete records documenting your sales and purchases. For nontaxable transactions, those records should clearly indicate the reason the transaction was not subject to tax. You should maintain resale and exemption certificates and other information necessary to back up each exemption or deduction. You should keep required records for at least four years unless CDTFA gives you specific, written authorization to destroy them sooner. If you are being audited, you should retain all records that cover the audit period until the audit is complete, even if that means you keep them longer than four years. In addition, if you have a dispute with CDTFA about how much tax you owe, you should retain the related records until that dispute is resolved. For instance, if you appeal the results of an audit or another determination (billing), or you file a claim for refund, you should keep your records while that matter is pending. Source: California Department of Tax & ...

If you pay tax on a sale and then cannot collect all or part of the amount due to you for that sale, you may claim a deduction for the taxable portion of the bad debt. You must first charge off the bad debt for income tax purposes, or if you are not required to file income tax returns or you file income tax returns on a cash basis, charge it off in accordance with generally accepted accounting principles. You should claim the deduction on the tax return for the period in which you found the account worthless and charged it off. If only a portion of your original charges were taxable, you may deduct only a like portion of the bad debt. First, you must determine the taxable percentage of your original sale (taxable portion ÷ total charge = taxable percentage of total). Next, apply the taxable percentage to the total bad debt to determine the allowable bad debt deduction. If the tax rate has changed since you originally paid tax on the sale, you will need to make adjustments in your calcu...

If you were required to pay, and did pay another state’s sales or use tax on a purchase, you may take a credit against your use tax liability by: Reporting the amount of the purchase under Purchases Subject to Use Tax, and Deducting the amount of tax paid under Sales or Use Tax Paid to Other States on your return. You can claim a credit up to the amount of California use tax due. Source: California Department of Tax & Fee Administration (CDTFA) Course: https://salestaxsolutions2000.com/california-sales-tax-interior-designers

You may take a deduction on your sales and use tax return if you paid an amount for California sales or use tax when you purchased an item and then sold that item in a taxable transaction before using it. Include the price of the item under Cost of Tax-Paid Purchases Resold Prior to Use. Example: You buy furniture for your office, paying an amount for sales tax to your supplier. You decide not to use one end table and sell it to a client. You can take a deduction for the cost of the table on the same tax return on which you report the sale to your client. Source: California Department of Tax & Fee Administration (CDTFA) Course: https://salestaxsolutions2000.com/california-sales-tax-interior-designers

As discussed previously, tax does not apply to your charges for repair and installation labor or to certain professional fees. On your tax return you should list these amounts under “Nontaxable Labor” and deduct them from your total sales. Source: California Department of Tax & Fee Administration (CDTFA) Course: https://salestaxsolutions2000.com/california-sales-tax-interior-designers

As discussed previously, some of your purchases are subject to use tax. You must report the total cost of all of your taxable purchases on your sales and use tax return as Purchases Subject to Use Tax. Tax is due with the return for the period in which you incurred the tax liability. Example You issue a resale certificate in January when you purchase 1,000 square yards of fabric for $7 a yard. You sell 400 square yards to walk-in clients in your showroom and use another 580 square yards in making draperies you sell to clients. In August, you give the remaining 20 yards to a friend—a taxable use. You must report your $140 cost for that fabric ($7 per yard multiplied by 20 yards) as a $140 purchase subject to use tax on your tax return that covers the month of August. Source: California Department of Tax & Fee Administration (CDTFA) Course: https://salestaxsolutions2000.com/california-sales-tax-interior-designers

You should report credit card sales as if they were cash transactions. The service charge or discount you pay the credit card organization is not allowed as a discount or deduction for sales tax purposes. You should report the sale when the client takes possession or ownership of the merchandise, not when you are paid by the credit card company. Source: California Department of Tax & Fee Administration (CDTFA) Course: https://salestaxsolutions2000.com/california-sales-tax-interior-designers

The total sales you list on your sales and use tax return must include the price of items you sold on credit during the reporting period, even though you may not receive full payment until a later date. Tax is due on the full selling price. However, you may exclude amounts for insurance, interest, finance, and carrying charges from the taxable selling price you report for a credit sale, provided you keep adequate and complete records documenting those charges. Tax is due when ownership or possession of the product sold transfers to your client, regardless of when you receive payment. Consequently, if you take a deposit for future delivery of merchandise, you should not report that amount on your tax return until the delivery is actually made or you transfer ownership to your client. Example In June, a client places an order for new chairs, tables, and a desk for her office, for a total price of $7,500. You deliver the products in July. The client pays you $4,500 in June and agrees t...