Changes Abound: Wayfair and California's New Tax Agencies.

• Author: Klasing, David W.
• Position: CA Tax

If tax practitioners were asked to describe the past year, a resounding majority would likely answer "busy." In late 2017, the United States' tax landscape saw its biggest change since the Tax Reform Act of 1986. Tax rates were modified, and the way that the IRC treats state and local taxes, as well as the way that income from international operations is taxed, saw major overhauls.

As if the Tax Cuts and Jobs Act of 2017 changes were not enough, the Supreme Court's reversal of Quill has altered the way businesses, tax practitioners and states think about levying sales tax on remote sellers. F

Finally, California's tax administration structure changed, leaving practitioners to determine what the Supreme Court's stance on sales tax and its enforcement in California means for their clients.

Restructuring California's Tax Agenices

In 2017, California moved to restructure and shuffle responsibilities of the state's tax agencies.

The Taxpayer Transparency and Fairness Act of 2017 reassigns duties from the Board of Equalization to two newly created tax agencies: the Office of Tax Appeals (OTA) and the California Department of Tax and Fee Administration (CDTFA).

The Legislature had grown concerned about the professional environment at the BOE and thought it best to have it focus on its duties that arc spelled out in the state constitution.

The CDTFA will take over the administration of taxes that had previously been done by the BOE, including sales and use, business and excise taxes. The OTA will hear appeals that relate to taxes administered by the CDTFA, as well as appeals from the FTB's administration of state income and franchise taxes.

Appeals Process Changes

The biggest change resulting from the creation of the OTA, CDTFA and reassignment of the BOE's responsibilities is how tax appeals are heard. In the past, appeals were heard by the five-member BOE. Under the new appeals structure, appeals will be heard by administrative law judges that arc a part of the OTA's tax appeal panels.

Landscape Changing Rulings

As California worked diligently to fill vacancies created by the addition of the OTA and the CDTFA, the Supreme Court overruled Quill Corp. v. North Dakota, a 1992 case that ruled states can only require the collection and remittance of sales tax if a seller has a physical presence in that particular state.

In Wayfair v. South Dakota, the South Dakota Legislature passed a law that required the collection and remittance of sales tax for...