Los Angeles California Tax Attorney Blog

California Tax Attorney: With the declining tax revenues and no budget in place, California Franchise Tax Board announced today that the state will suspend tax refunds, welfare checks, student grants and other payments owed to Californians starting Feb. 1,

According to Los Angeles Times Tax News California Controller John Chiang said he had no choice but to stop making some $3.7 billion in payments in the absence of action by the governor and lawmakers to close the state's nearly $42-billion budget deficit. More than half of those payments are tax refunds.

Is California going bankrupt?

Sales Tax Attorney

California Sales Tax Problem BOE Sales Tax audit levels have been increasing in recent years as California budget problems creates additional need for enforcement and collection of existing sales taxes.

One the most common targets for California Sales Tax Audits in recent years has been owners of gas and service stations. Under the Sales and Use Tax Law, the sale or use of merchandise, including fuel, is taxable. For an auto repair business or service station, tax generally applies to sales or use of all of the following:

• New, used, or rebuilt automobile parts. This includes both general repair or maintenance parts such as spark plugs, belts, tires, batteries, PCV valves, and brake shoes or pads; and replacement parts such as engines, transmissions, alternators, water pumps, fenders or bumpers.

• Parts you manufacture. The taxable selling price of the part should include the cost of the labor required to manufacture it.

• Lubricating products such as oil and grease.

• Automotive fluids such as brake or transmission fluid and window washer solution.

• Fuel.

Your sale is taxable unless it qualifies for an exemption or exclusion It is important to remember that the taxable selling price of an item may include not only the charge for the item itself, but also charges for mandatory warranty contracts.

For fuel sales, the taxable selling price can also include charges for certain state and federal excise taxes.

As a retailer, you owe the sales tax to the state. But you may collect from your customer an amount equal to the tax you will owe. This is usually itemized on sales invoices as “sales tax.”

Labor and services
Generally your charges for labor and services are not taxable (two exceptions are noted below). You must list labor and service charges separately on your customer invoices. This includes your charges for:

• Installation labor on used vehicles such as replacing spark plugs, replacing brake shoes or pads, removing and installing engines, or installing sound systems.

• Repair labor to bring a vehicle back to its original condition. Examples of repair labor include rebuilding carburetors or heads, replacing parts in engines or transmissions, and performing body and fender work.

• Maintenance services such as tune-ups, oil changes, or radiator flushes.

• Services such as charging a battery or towing a vehicle.

Exceptions

While sales and use tax generally does not apply to labor charges, there are two exceptions. Labor charges for making a part (“fabrication labor”) are usually taxable, as are labor charges for installing parts on new vehicles.

If you have further questions about California Sales Tax Audits please contact us.

Content Source: California BOE

Los Angeles Tax Attorney

United States Tax Court US TAX COURT intervention to expedite release of federal tax lien may not be required due to a new guideline issued by the IRS.

Internal Revenue Service IRS TAX today announced an expedited process that will make it easier for financially distressed homeowners to avoid having a federal tax lien block refinancing of mortgages or the sale of a home.

If taxpayers are looking to refinance or sell a home and there is a federal tax lien filed, there are options. Tax Attorneys may request that the IRS make a tax lien secondary to the lien by the lending institution that is refinancing or restructuring a loan. Taxpayers or their representatives may request that the IRS discharge its claim if the home is being sold for less than the amount of the mortgage lien under certain circumstances.

The process to request a discharge or a subordination of a tax lien takes approximately 30 days after the submission of the completed application, but the IRS will work to speed those requests in wake of the economic downturn.

“We don’t want the IRS to be a barrier to people saving or selling their homes. We want to raise awareness of these lien options and to speed our decision-making process so people can refinance their mortgages or sell their homes,” said Doug Shulman, IRS commissioner.

Filing a Notice of Federal Tax Lien is a formal process by which the government makes a legal claim to property as security or payment for a tax debt. It serves as a public notice to other creditors that the government has a claim on the property.

In some cases, a federal tax lien can be made secondary to another lien, such as a lending institution’s, if the IRS determines that taking a secondary position ultimately will help with collection of the tax debt. That process is called subordination.

Taxpayers or their representatives may apply for a subordination of a federal tax lien if they are refinancing or restructuring their mortgage. Without lien subordination, taxpayers may be unable to borrow funds or reduce their payments. Lending institutions generally want their lien to have priority on the home being used as collateral.

Tax Attorneys may apply for a certificate of discharge of a tax lien if they are giving up ownership of the property, such as selling the property, at an amount less than the mortgage lien if the mortgage lien is senior to the tax lien.

The IRS may also issue a certificate of discharge in other circumstances if the taxpayer has sufficient equity in other assets, can substitute other assets, or is able to pay the IRS its equity in the property. Without a tax lien discharge, the taxpayer may be unable to complete the home ownership change and the ownership title will remain clouded.