The California sales tax appeals process usually begins after receiving a Notice of Determination or a Notice of Jeopardy Determination following a California Department of Tax and Fee Administration (CDTFA) audit. The Notice of Determination is a determination by the CDTFA that you owe additional taxes. To appeal the Notice of Determination, the next step is to file a petition for re-determination.
The petition for re-determination is your opportunity to tell your side of the story and to be heard. In the petition process you are given the ability to challenge the determination made by the auditor. The petition process allows you to identify the amount you contest and state the grounds by which you don’t believe are owed. In this process you may even request to participate in the CDTFA Settlement Program.
Often times, appeals can be resolved in this time through the providing of additional evidence to support your claims and through discussions with Business Tax and Fee Division (BTFD). However if it cannot, your case will be referred to the Appeals Division for an appeals conference. At this point you will be sent a Verification of Appeals Conference form to continue the process and assign a location for the appeals process, followed by a Notice of Appeals Conference to assign you the exact date and location. The Appeals conference will be held by the Appeals Bureau.
After the Appeals Conference, the Appeals Bureau issues a Decision and Recommendation based on all relevant evidence. At the point one of four recommendations can be made:
- 1) grant you appeal;
- 2) Deny your appeal;
- 3) Deny your appeal in part; or
- 4) that a re-audit be issued.
At this point, if you do not agree with the determination of the Appeals Bureau, you may request a hearing with the Office of Tax Appeals (OTA) . The OTA is a state agency independent of the CDTFA and is the next opportunity to argue your position. OTA cases are heard by three judge panels and are somewhat informal. Similar to the Appeals Conference, you or your representative will have the opportunity to give your opinion on your case to the OTA. After meeting with the OTA, it will issue a determination. At this time, unless you file a petition for rehearing, the decision by the OTA will become final in 30 day. If the OTA determines that you do have a tax liability, you are required to pay that amount, even if you still disagree.
Now that you have paid the tax that was determined by the OTA, your next step is to file a claim for a refund. A claim for a refund can only be made on money actually paid, so you must have actually paid the amount you are claiming a refund for. To file a claim for refund you must fill out form CDTFA-101. On this form you will specify the amount you feel you overpaid and the reasons why you feel you overpaid. Like with a petition for determination, if your claim is denied you may make a request an appeals conference or a hearing before the Appeals Bureau. If the Appeals Bureau denies your claim for a refund, that ends the appeals process with the CDTFA. The only remaining way to contest the liability is by filing an action in court for the refund.
Though there is no other way to avoid the liability, there are other ways to avoid some or all of the taxes. One such route is through a settlement proposal during the appeals process. To settle a tax liability, a settlement must be reached with Settlement Bureau staff and approved by the CDTFA Director. Similarly, after the appeals process an Offer in Compromise may be put forward to settle a liability for less than the full amount. Offers in Compromise may be made when you do not have, and will not have in the foreseeable future, the ability to pay the liability.
Sales tax issues may be extremely complicated. As you can see, the settlement and appeals procedure involves multiple steps with multiple offices inside and outside of the CDTFA. If you have any questions or if we can further assist you, please contact our California Sales Tax Appeals Attorneys.
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