Make Sure You Know the Three California Tax Agencies

*The following article was updated in March 2024*

In the state of California, there are three separate taxing agencies. This is unbelievable. In Wisconsin, there’s the Wisconsin Department of Revenue. In New York, it’s the New York Department of Revenue. Most other states have one agency that handles their taxation. In the state of California, we have three separate departments with three separate powers of attorney, three separate audit procedures, three separate documents, three separate levels of appeal and collections. So it’s really important to understand, as a business owner, which agency you’re dealing with, what information is shared with multiple agencies, and what the steps are that need to be taken to resolve your issue with that agency.

The EDD handles payroll tax, most payroll tax issues result from a payroll tax audit. They’re looking at the books and records of the business to make sure the payroll was processed correctly, and that the independent contractors that you’ve classify are in fact, independent contractors and not employees.

The State of California also has the Franchise Tax Board, which handles income tax, income tax audits, residency audits are very common under the Franchise Tax Board. Nobody wants to pay California taxes. Obviously, everyone thinks they can move to Arizona or Nevada and avoid this income tax. It’s really important to understand that California has these residency audits to make sure we all pay our equal share.

The third agency is the CDTFA. That is the sales tax department. It’s really important to understand sales tax. When you sell something, you have a duty to withhold the sales tax to pay over to the government. Sales tax audits can be very long, very tedious and can cost a substantial sum of money.

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Allison Soares

Allison Soares, a renowned tax attorney, excels in representing clients before the IRS, FTB, EDD, and CDTFA. With a Bachelor of Arts in Finance from the University of Wisconsin, Milwaukee, and a transformative teaching stint in Brazil, Allison’s diverse background enriches her legal expertise. She pursued law at St. Thomas University School of Law, Miami, complementing it with an MBA in accounting and forensic accounting. Further honing her skills, she obtained a Master of Laws in Taxation from the University of San Diego School of Law. As an adjunct professor at San Diego State University, Allison imparts her knowledge in tax procedures, practice, and ethics. Her accolades include being named Best of the Bar by the San Diego Business Journal and multiple Super Lawyer recognitions. Committed to community service, she volunteers with Forever Balboa Park and Friends of Balboa Park. Allison’s authoritative contributions in tax law are showcased through her publications and speaking engagements.

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