This past June, Michael Steven Rock of “Rock Bottom Beds,” a furniture store in Roseville, California, was sentenced to one year in jail followed by five years’ probation for sales tax evasion and filing a false state income tax return. From July 2008 through June 20012, Mr. Rock had collected roughly $300,000 in sales tax from his customers, but never paid it over to the state. He also underreported his 2011 California income by $77,000. In addition to his prison sentence, Rock will have to pay $701,430 in restitution to the California Department of Tax and Fee Administration (CDTFA) and another $209,499 to the Franchise Tax Board (FTB).
California sales and use tax
California consumers are obligated to pay sales tax for sales of goods, unless they are specifically exempt (such as groceries, prescription drugs, and manufacturing equipment). Use tax must be paid for goods consumed and not subject to sales tax, and for purchases made from another state via the internet, or by mail order or telephone. Retailers are then required to remit what they collected to the state.
California sales tax rate (2018)
The State of California implemented its first sales tax in 1993 and its first use tax two years later. The initial sales tax rate was 2.5 percent, with all revenue going to the state’s General Fund. Today, the base statewide California sales tax rate is 6%, with an additional local tax rate of 1.25%, for a total of 7.25%. Add to that a district tax (county) rate, which varies depending on the district and may be anywhere from 0% to 3%.
There are more than 20 different sales tax rates throughout the state, some of which are as high as 10.25%.
Where do all those sales taxes go?
Of sales tax collected, 6% goes to the State of California for:
- General Government Fund (4%)
- Local Revenue Fund for public safety services (1%)
- Local Public Safety Fund to support local criminal justice efforts (0.5%)
- Local Revenue Fund to support health and social service programs (0.5%)
1.25% goes to fund county and city government programs:
- Country/city operational funds (1%)
- County transportation (0.25%)
Over the years, additional taxes have been used for any number of county programs, including:
- Fighting homelessness
- Repaying state deficit-financing bonds
- Recreation
- The Arts
- Roads and infrastructure
- Transit services
- Parks
- Firefighters, fire safety and recovery
- Paramedics, emergency response
- Police officers, public safety services and equipment
- Other “special use” projects
California sales tax attorneys
Sales taxes are a vital component in the development of communities and our local government agencies take their collection very seriously. A quick google search for Rock Bottom Beds quickly reveals its owner’s jail sentence, which is not great advertising for any business. The civil and criminal tax defense teams at Moskowitz, LLP are ready to help you resolve your tax issue before it goes public. Contact our San Francisco law offices today.