NEWS FOR TAX PRACTITIONERS 1
CAL
IFORNIA DEPARTMENT OF TAX AND FEE ADMINISTRATION
Publication 542 (February 2023) | Edition 17
This semiannual newsletter informs you of the recent changes to tax and fee programs administered by the California Department of
Tax and Fee Administration (CDTFA) and other California state agencies that may affect your clients’ businesses. This newsletter also
provides efficient, accurate, professional tax information and guidance in preparing your clients’ returns.
NEWS FOR TAX PRACTITIONERS
WHAT YOU NEED TO KNOW TO HELP YOUR CLIENTS SUCCESSFULLY OPERATE THEIR BUSINESSES
MISSION: We make life better for Californians by fairly and efficiently collecting the revenue that supports our essential public services.
California Cigarette Tax Stamps Purchased
Before March 17, 2020, Are Expiring – Claims
for Refund Are Now Being Accepted
There are two versions of red-orange California cigarette tax stamps in
circulation. Stamps sold before March 17, 2020, will expire in early 2023.
Cigarette distributors who purchased these stamps on a cash basis have until
March 16, 2023, to file a claim for refund. Distributors who purchased these
stamps on a deferred payment basis have until April 25, 2023, to file a claim
for refund. We will not accept refund claims for the expiring stamps after
these dates.
To submit a claim for refund, you or your client must log in with a username
and password at onlineservices.cdtfa.ca.gov. For claims for refund involving
cigarettes from multiple manufacturers, a separate claim must be filed for each
manufacturer.
The current and expiring stamps look very similar. The easiest way to identify
the expiring stamps is to look at the color on the left side of the stamps.
Expiring Stamps
• The color on the left side of the expiring stamps is darker than on the
current stamp.
• The star on the left side of the expiring stamp has a thinner white border,
and two of the star points are cut off.
• There is a larger gap between the star and the letters “CA” on the expiring
stamps.
Current Stamps
• The color of the left side on the current stamp is lighter.
• The star on the left side of the current stamp has a thicker white border,
and only one star point is cut off.
• The star is set close to the letters “CA.”
Expiring Stamp: Current Stamp:
Cannabis Taxes
Beginning January 1, 2023, cannabis retailers,
including microbusinesses that sell cannabis or
cannabis products at retail, are responsible for
collecting the 15 percent cannabis excise tax
from purchasers based on gross receipts from
the retail sale of cannabis or cannabis products.
In December 2022, we automatically registered
cannabis retailers with a cannabis retailer
excise tax account. If a cannabis retailer was
not automatically registered with us, the retailer
must register for a cannabis retailer excise tax
account through our online services. Additionally,
cannabis retailers must report and pay the
cannabis excise tax to us for their retail sales of
cannabis and cannabis products that are made
on and after January 1, 2023.
For more information, please visit our online
Tax Guide for Cannabis Businesses, at
www.cdtfa.ca.gov/industry/cannabis.htm, and our
special notices:
• New Responsibilities for Cannabis Retailers
Beginning January 1, 2023, at
www.cdtfa.ca.gov/formspubs/L874.pdf
•
Cannabis Excise Tax Changes Beginning
January 1, 2023, and New Enforcement
Provisions, at
www.cdtfa.ca.gov/formspubs/L866.pdf
• Certain Cannabis Retailers May Apply to
Retain Vendor Compensation, at
www.cdtfa.ca.gov/formspubs/L884.pdf
Additional Used Motor Vehicle Dealers Are Required to Pay Tax to the Department
of Motor Vehicles Beginning January 1, 2023
Beginning January 1, 2023, used motor vehicle dealers not currently paying sales tax to the Department of Motor Vehicles (DMV) that
made 300 or fewer retail vehicle sales in calendar year 2021, will be required to pay sales tax, including district taxes, on their retail
sales of used motor vehicles directly to DMV when they submit a vehicle registration application. All other used motor vehicle dealers
will have their payment method change postponed until January 1, 2026, unless otherwise notified by DMV.
(continue on page 2)
2 NEWS FOR TAX PRACTITIONERS
CALIFORNIA DEPARTMENT OF TAX AND FEE ADMINISTRATION
New 988 Surcharge Effective
January 1, 2023
Starting January 1, 2023, telecommunication service suppliers
and sellers of prepaid mobile telephony services (MTS)
are required to report a new 988 surcharge when filing the
Emergency Telephone User Surcharge Return or Prepaid MTS
Return.
The new legislation:
• Establishes a new 988 State Suicide and Behavioral Health
Crisis Services Fund.
• Imposes the 988 surcharge on each access line for each
month or partial month for which a service user subscribes
with a service supplier and each retail purchase of prepaid
MTS in California.
• Sets the 988 surcharge at $0.08 per access line or purchase
of prepaid MTS for calendar years 2023 and 2024.
o This surcharge will be reported on the same return as the
911 surcharge.
• On October 1, 2024, the California Governor’s Office of
Emergency Services (CalOES) will determine the surcharge
rate for 2025, and each October 1 thereafter, CalOES will
determine the surcharge rate for the following calendar year.
For more information, please see Assembly Bill (AB) 988 (Stats.
2022, ch. 747).
New Billing Process for Delinquent
Returns
In July 2022, we implemented a new automated billing process
for taxpayers that do not file timely returns. Taxpayers receive a
reminder to file before and after the due date of their return. The
reminders may be in the form of an email, a notice, a text message,
or a telephone call. If taxpayers do not file the return, they will first
receive a Notice of Delinquency, and then an estimated billing
notice, called a Notice of Proposed Assessment Liability, outlining
the proposed amount to be billed. Thirty days after the Notice of
Proposed Assessment Liability is sent, the proposed amount will
be billed and enter our collection process. This billing can easily be
avoided by timely filing your clients’ returns or promptly closing their
seller’s permit when their business operations end.
Returns can be filed online at any time. If taxpayers cannot pay the
amount due, they can request a payment plan using our
online services after they log in with their username and password.
Online Webinars and Video Tutorial
If you or your clients are interested in attending a seminar for
used motor vehicle dealers, please visit our Tax Education Events
webpage, at www.cdtfa.ca.gov/seminar/. From the webpage, click
Used Car Dealers Tax Return Preparation Webinar, and select
Register Online to sign up.
A video tutorial is also available to help you and your clients
complete the sales and use tax return and schedule, CDTFA-
531-MV. You will find it on our Online Services webpage, at
www.cdtfa.ca.gov/services/#Tutorials. From the webpage select
the Returns heading, select the Sales and Use Tax subheading,
and then select How to file Schedule MV. For additional assistance,
please call our Customer Service Center at 1-800-400-7115
(CRS:711). Customer service representatives are available Monday
through Friday from 7:30 a.m. to 5:00 p.m. (Pacific time), except
state holidays.
For more information, please see Senate Bill (SB) 1496 (Stats. 2022,
ch. 474), and for important tips to make filing returns and payments,
and reconciling with DMV records easier, please see our special
notice, Certain Used Motor Vehicle Dealers Required to Pay Tax to
the Department of Motor Vehicles Beginning January 1, 2023, at
www.cdtfa.ca.gov/formspubs/L870.pdf.
Tax Holidays – Impacts for IFTA
To aid with the increasing price of fuel throughout 2022, various
states have enacted legislation to suspend the application
and collection of various motor vehicle fuel taxes through “tax
holidays.” Tax holidays may impact the tax reporting for specified
periods of time for motor carriers who participate in IFTA.
You may contact our Motor Carrier Office at 1-916-309-0900
with questions concerning the filing of a quarterly IFTA returns
during tax holidays. You may also obtain a complete list of states
participating in the tax holidays by visiting
www.iftach.org.
Requesting a Power of Attorney
You must register as a power of
attorney (POA) with us to discuss
any of your client’s accounts. You
can register as a POA online or by
mail.
To submit a POA request online, you must first create a
profile on our online services page by selecting Sign Up
Now. Then, under the Registration Options heading select
Create My Log On. Once you have created a profile, click on
More under the I Want to heading, then click on Request a
Power of Attorney, and complete the requested information.
The system will create an online notice and a system-
generated letter that will be mailed to your client indicating
that you have requested to be their POA. Your client can
approve it online, or by calling our Customer Service Center
at 1-800-400-7115 (CRS:711).
If you would like to register as a POA by mail, CDTFA-392,
Power of Attorney, can be downloaded from our website.
The completed form can be mailed to a CDTFA local field
office.
Taxpayers may also provide any document identified as a
“power of attorney” that includes the following information:
• Taxpayer’s name, telephone number, identification
number(s), account or permit number(s), and mailing
address;
• The name, address (including email, if any), telephone
and fax number of the appointed representative(s);
• The tax or fee matters the representative is authorized to
represent the taxpayer; the scope of the representative’s
authority; and the filing period(s) for which the
authorization is granted;
• A statement that the power of attorney revokes all
prior powers of attorney, with any exceptions to the
revocation noted;
• The time period during which the POA shall be in effect;
and
• The signature(s) and title of all affected taxpayers and
the date of signature.
(continued from page 2)
NEWS FOR TAX PRACTITIONERS 3
CALIFORNIA DEPARTMENT OF TAX AND FEE ADMINISTRATION
Online Filing Requirement for Alcoholic
Beverage Taxpayers
Beginning January 1, 2023, alcoholic beverage returns and
supplemental reports must be filed electronically (see SB 518
[Stats. 2022, ch. 702]). If you or your client already file online, no
action is needed. If you or your clients are not already filing online
and have not created a username and password in our online
services system, a unique security code is required to complete this
process. Please view our video tutorials online for assistance with
creating a username and password, including requesting a security
code, and filing online, or contact us at 1-800-400-7115 (CRS:711),
then select the Special Taxes and Fees option. Customer service
representatives are available Monday through Friday from 7:30 a.m.
to 5:00 p.m. (Pacific time), except state holidays.
Partial Tax Exemption for Zero-
Emission Technology Transit Buses
Extended Through December 31,
2025
The partial sales and use tax exemption for eligible
purchases and leases of hybrid and zero-emission
technology buses by qualifying purchasers was
scheduled to expire December 31, 2023. It is now
available through December 31, 2025 (see AB 2622 [Stats.
2022, ch. 353]).
Qualifying purchasers generally include cities, counties,
transportation or transit districts, and other public
agencies that provide transit service to the public. To
qualify for the partial exemption, the zero-emission
technology transit bus must be eligible for the California
Hybrid and Zero-Emission Truck and Bus Voucher
Incentive Project (HVIP).
For more information about this partial exemption, please
see the subheading, Sales of Zero-Emission Transit
Buses to Qualifying Purchasers, under the Industry
Topics tab in our Tax Guide for Motor Vehicle Dealers,
at www.cdtfa.ca.gov/industry/used-vehicle-dealers.
htm#Zero-Emission-Transit-Bus-Sales.
Dis
closure of Information Contained in
a Winegrower Return and Supplemental
Report
Beginning January 1, 2023, any information, except the name
and address of a natural person (such as a sole proprietor or
partnership), contained in winegrower returns and supplemental
schedules filed on or after January 1, 2023, must be made public
upon request (see SB 518 [Stats. 2022, ch. 702]). However,
taxpayers may elect to prohibit the disclosure of their return and
accompanying schedule information. We will update the January
2023 winegrower online return with more information about this
change and provide an option to allow your client to opt-out of
disclosing their return information.
Additional information can be found in our special notice available
in the Resource section of our Tax Guide for Alcoholic Beverage,
at www.cdtfa.ca.gov/taxes-and-fees/alcoholic-beverage-tax.htm.
This guide will be updated as more information becomes available
– please check back periodically for updates.
Sales and Use Tax for Nonprofit
Organizations
Although many nonprofit organizations are exempt from federal
and state income tax, there is no similar exemption from California
sales and use tax. Generally, a nonprofit’s sales and purchases
are taxable. In other words, nonprofit organizations, in general, are
treated just like other California sellers and buyers for sales and use
tax purposes.
However, there are exemptions available for certain nonprofit
organizations. Examples of nonprofit organizations that have
specific sales and use tax exemptions can be found in publication
18. How tax applies to sales by a certain nonprofit organization
is fact-specific and depends on the type of organization and the
organization’s practices and activities. For example, some nonprofit
organizations may qualify for special exemptions from sales or use
tax on meals and food products that are delivered to the elderly and
people with disabilities while others are afforded an exemption on
items sold, such as military welfare society thrift stores.
For more information on nonprofit organizations and available
exemptions, please see publication 18, Nonprofit Organizations, at
www.cdtfa.ca.gov/formspubs/pub18.pdf, publication 262, Tax Help
for Nonprofit and Faith-Based Organizations, at
www.cdtfa.ca.gov/formspubs/pub262g.pdf, and our Tax Guide for
Nonprofit Organizations, at
www.cdtfa.ca.gov/industry/nonprofit-organizations.htm#Overview,
available on our website.
Military Thrift Stores
The exemption from tax on sales made by military welfare society
thrift stores was scheduled to expire on December 31, 2023, but
has now been made permanent. As a result of this exemption,
tax does not apply to sales by a thrift store located on a military
installation and operated by an entity that partners with the United
States Department of Defense to provide financial, educational,
and other assistance to members of the Armed Forces of the
United States, eligible family members, and survivors that are in
need (see SB 1041 [Stats. 2022, ch. 225]).
New Law Prohibits Retail Sales of
Menthol Cigarettes and Most Flavored
Tobacco Products
Beginning December 21, 2022, cigarette and tobacco products
retailers may no longer sell, offer, or possess with the intent to sell,
menthol cigarettes and most flavored tobacco products. The law
does not apply to flavored premium cigars with a wholesale price
(retailer’s purchase price) of $12 or more and flavored loose-leaf
pipe tobacco. Flavored shisha or hookah tobacco may be sold
in licensed retail stores that only admit persons 21 years or older
and operate following all state and/or local laws. Please visit the
California Department of Public Health’s website for frequently
asked questions, a fact sheet, and other useful resources.
For more information, please read SB 793 (Stats. 2020, ch. 34),
which was upheld by the passage of Proposition 31 and added the
flavored tobacco sale prohibition section 104559.5 to the Health
and Safety Code, and our special notice, New Law Prohibits Retail
Sales of Menthol Cigarettes and Most Flavored Tobacco Products,
at www.cdtfa.ca.gov/formspubs/L885.pdf.
4 NEWS FOR TAX PRACTITIONERS
CALIFORNIA DEPARTMENT OF TAX AND FEE ADMINISTRATION
Thank you for connecting with us.
Upcoming International Fuel Tax
Agreement Record Review
Our Motor Carrier Office will be contacting new licensees to
conduct records reviews at their place of business according to
the International Fuel Tax Agreement (IFTA) Audit Manual section
A510, Records Review Implementation, which are intended to
help licensees comply with IFTA recordkeeping requirements.
The purpose of these record reviews is to assist licensees in
preparing and documenting their fleets’ operations as required
by IFTA Procedures Manual section P530, Adequacy of Records.
This review focuses only on the adequacy of internal controls
and compliance of distance and fuel accounting systems and
does not constitute an audit of any previously filed quarterly
return. The records review does not result in findings or tax
adjustments, nor are the periods included in the review excluded
from a future audit.
Limited Access Codes Phasing Out: Sign
Up Now for a Username and Password
We are phasing out the Limited Access Code (LAC) feature. If you
or your clients are using an LAC to file or make payments on our
online services system and have not created an online profile with
a username and password, we encourage you to Sign Up Now.
By creating a username and password, you will have access to all
the enhanced features of our system.
The online services portal is also a great tool for keeping up to
date on your client’s accounts. You will be able to see the status of
relief requests as well as view and print previously mailed letters,
payments, and filed returns and reports for your client’s accounts.
It is important that your client’s account information is up to
date, especially if your client is due a refund that includes
credit interest. The CDTFA requires taxpayers to provide
a Social Security Number (SSN) or Federal Employee
Identification (EIN). Please make sure this information is
furnished when submitting a claim for refund.
Video tutorials on how to log in and request access to client’s
accounts are available on our website at
www.cdtfa.ca.gov/services/#loggingToggle.
New Program for Lithium Producers
Beginning January 1, 2023
Beginning January 1, 2023, any person (producer) extracting
lithium from a naturally occurring substance such as geothermal
fluid, spodumene ore, rock, minerals, or clay, must pay a lithium
extraction excise tax. The new tax is based upon the lifetime
cumulative amount of metric tons of lithium carbonate equivalent
extracted in California and each producer must register for a
lithium excise tax (LET) permit with us.
If your client plans to extract lithium in California in 2023, we
will help them register for their LET permit. Please contact us
at 1-800-400-7115 (CRS:711), then select the Special Taxes and
Fees option. Customer service representatives are available
Monday through Friday from 7:30 a.m. to 5:00 p.m. (Pacific time),
except state holidays.
For more information, please visit our Lithium Extraction
Excise Tax Guide, at www.cdtfa.ca.gov/taxes-and-fees/lithium-
extraction-excise-tax.htm. We will update this guide as more
information becomes available – please check back periodically
for updates.
Staying In Compliance
Misclassifying workers can be costly to a business, so it pays
to stay in compliance. If worker misclassification is discovered
during an audit, the business is responsible for unpaid
Unemployment Insurance (UI) and Employment Training Tax,
worker contributions not properly withheld, and the interest
from when those contributions were legally due, until paid. The
business may also be subject to penalties on the amount due.
Misclassification also affects workers, as it impacts their ability
to access vital resources to which they are entitled, such as UI,
Disability Insurance (DI), and Paid Family Leave (PFL) benefits.
The Employment Development Department (EDD) provides vital
resources for businesses to stay informed on the current law.
ABC Test
Beginning January 1, 2020, section 2775 was added to the
Labor Code and amended section 621(b) of the California
Unemployment Insurance Code (CUIC) by removing the
“common law rules” and applying the ABC test. Under the ABC
test, an individual providing labor or services for remuneration
is presumed to be an employee rather than an independent
contractor unless the hiring entity demonstrates certain
conditions apply. While the ABC test is the applicable test
for most workers, sections 2776 through 2784 of the Labor
Code establish exceptions to the ABC test for some workers,
occupations, and contracting relationships. For more information
about the ABC test and a full list of the ABC test exceptions,
please see AB 5 (Stats. 2019, ch. 296) and visit the California
Labor & Workforce Development Agency’s Employment Status
Portal, at www.labor.ca.gov/employmentstatus.
Education and Outreach
The EDD offers no-cost seminars throughout the year to help
employers comply with state payroll tax reporting requirements.
For more information or to register, please visit the EDD’s
Payroll Tax Seminars webpage, at seminars.edd.ca.gov/
payroll_tax_seminars.
Articles from Other State Agencies
Employment Development Department
Marketplace Facilitator Act Update:
P
assenger Vehicle Rental Brokers
A marketplace facilitator is generally considered the retailer
and responsible for collecting, reporting, and paying the tax
on retail sales made through their marketplace for delivery
to California customers. Beginning January 1, 2023, vehicle
rental brokers are not considered to be marketplace facilitators
when they facilitate, for a commission or fee, the rental of a
passenger vehicle on their marketplace on behalf of another
rental company that is not a related person. Therefore, vehicle
rental brokers are not responsible for the tax on such rentals of
passenger vehicles made through their marketplace by another
rental company.
For more information, please see SB 1312 (Stats. 2022, ch. 228)
and our Tax Guide for Marketplace Facilitator Act, at
www.cdtfa.ca.gov/industry/MPFAct.htm.
