California Assembly Bill No. 347: sales and use tax audit penalty.

• Author: Stevens, Cathleen

April 20, 2009

On April 20, 2009, Tax Executives Institute filed the following comments with the Committee on Revenue and Taxation of the California State Assembly about a proposal to impose a 25-percent penalty on taxpayers who fail or refuse to furnish any information requested during a sales and use tax audit. The comments were filed under the aegis of TEI's State and Local Tax Committee whose chair is Cathleen Stevens of Brunswick Corporation; Howard Grindle of Tata Communications, Americas) Inc., vice chair of the committee, contributed materially to the Institute's submission. Daniel B. De Jong, TEI Tax Counsel, serves as legal staff liaison to the committee.

On behalf of Tax Executives Institute ("TEI" or "the Institute"), I write to urge the defeat of Assembly Bill No. 347, which is scheduled for a hearing on April 27, 2009, before the Committee on Revenue and Taxation. The proposed legislation would impose a 25-percent penalty on taxpayers who fail or refuse to furnish any information requested during a sales and use tax audit. Because the proposed legislation is vague, overbroad, and unnecessary, it cannot achieve its stated purpose of advancing fairer and more efficient tax administration. Should the government conclude action is needed, we recommend the development of comprehensive administrative guidelines in lieu of this statutory amendment; these guidelines could govern all aspects of sales and use tax audits, including defining the types of information to be requested, production guidelines, and reasonable cause standards. TEI would welcome the opportunity to work with the Board of Equalization to develop those guidelines.

Background

Tax Executives Institute was founded in 1944 to serve the professional needs of business tax professionals. Today, the organization has 54 chapters in North America, Europe, and Asia, including 5 in the State of California. As the preeminent international association of business tax professionals, TEI has a significant interest in promoting sound tax policy, as well as in the fair and efficient administration of the tax laws, at all levels of government. Our 7,000 members represent 3,200 of the largest companies in the world, most of which are either resident or do business in California.

Assembly Bill No. 347--Background

Assembly Bill No. 347 ("the Bill") would amend Section 7054 of the California Revenue and Taxation Code to authorize the California State Board of Equalization ("the Board") to impose a 25-percent penalty if, during a sales or use tax audit, a taxpayer fails or refuses to timely furnish any information requested...