Report 2017-106 Recommendation 6 Responses
Report 2017-106: The Bradley-Burns Tax and Local Transportation Funds: Changing the Allocation Structure for the Bradley-Burns Tax Would Result in a More Equitable Distribution of Local Transportation Funding (Release Date: November 2017)
Recommendation #6 To: Tax and Fee Administration, California Department of
To help address California's e-commerce tax gap and further ensure out-of-state retailers' compliance with state law regarding nexus, Tax Administration should implement a two-year pilot of its authorized reward program for information resulting in the identification of unreported sales and use taxes.
Annual Follow-Up Agency Response From October 2019
Since the 2017 release of the audit findings, the responsibility for use tax on e-commerce transactions and the definition of nexus has changed for out-of-state retailers. As a result of the U.S. Supreme Court's 2018 decision in Wayfair v. South Dakota and the Legislature's subsequent passage of AB 147 and SB 92, California now has an economic nexus standard that requires any business making sales over $500,000 in this state to collect use tax from its California customers and report it directly to CDTFA. Additionally, effective October 1, 2019, marketplace facilitators are required to collect the sales or use tax on sales facilitated through the marketplace. These statutory changes are expected to significantly reduce the e-commerce tax gap, therefore, the reward program will not be pursued at this time.
California State Auditor's Assessment of Annual Follow-Up Status: Will Not Implement
1-Year Agency Response
The CDTFA is currently drafting a sales and use tax regulation for the reward program to be completed and sent to the Office of Administrative Law by July 31, 2019.
- Estimated Completion Date: July 31, 2019
- Response Date: October 2018
California State Auditor's Assessment of 1-Year Status: Pending
6-Month Agency Response
CDTFA is contacting other states to determine whether they offer reward programs and if so, what revenue is generated from them and under what terms. The information gathered will be used to determine the viability of a budget change proposal. We are expecting to acquire responses to this survey by the end of May, 2018 and anticipate completing our analysis and determination of next steps by June 2018.
- Estimated Completion Date: July 1, 2019
- Response Date: May 2018
California State Auditor's Assessment of 6-Month Status: Pending
Tax Administration says it needs to complete its review and analysis of other states before implementing our recommendation.
60-Day Agency Response
The CDTFA appreciates the recommendation made by the CSA and the related authority to operate a reward program. We are open to piloting a reward program and will explore the feasibility of a pilot program within our existing authority. Please note that the CDTFA currently has a mechanism for stakeholders to provide information of potential non-compliance with tax and fee laws. Since non-compliance results in unfair competition, we often receive such information from law-abiding citizens who want to ensure a level playing field.
- Estimated Completion Date: Not Yet Determined
- Response Date: January 2018
California State Auditor's Assessment of 60-Day Status: No Action Taken
The agency is open to the recommendation but has taken no steps towards implementing it yet.
All Recommendations in 2017-106
Agency responses received are posted verbatim.