That headline is a mouthful- I wasn’t really sure how to shorten it down! Essentially, it’s something that comes from the state of California from the Franchise Tax Board and it says you might owe them taxes even if your business is outside of CA!
It looks like this:
We had a client get it because they registered to pay sales tax in CA back before Amazon was collecting and reporting on their behalf.
CA sends these out to businesses it thinks might owe tax in CA because they were doing business in CA. If you in fact had an office in the state or employees in the state or were otherwise actively doing business in the state during the year this might be the case.
On the other hand, if all you were doing was selling via an online platform then you might be able to get out of owing anything by completing the portion of the form for non qualifying businesses. It’s a four page long questionnaire but the main focus for online sellers is to see if you had economic nexus (nexus solely as a result of the activity of the business even with no physical presence or other qualifying criteria).
They determine this by seeing if your total sales in the state exceeded $500,000 OR if your sales in the state were 25% or more of your total sales. If the answer to either of those is yes, you might owe CA some income taxes.
But if the answer to both of those is no, along with the other qualifying questions on the form, you may very well be able to get out of owing them anything. If you need help completing the form, let us know, we’re happy to help. I have a feeling we’ll be seeing a lot more of these over the next few weeks.