Tax team checks on Modesto businesses

Tax collectors are headed to Modesto.

Starting Monday, they will walk door-to-door searching for businesses that have been dodging their duty to pay sales taxes.

A team of business tax specialists will target commercial areas in downtown and south Modesto, and other businesses with 95350, 95351, 95352 and 95353 ZIP codes.

They'll be asking business owners to prove they have a seller's permit and are properly registered to pay sales taxes.

This will be the first visit to Modesto by the Statewide Compliance & Outreach Program, but it won't be the last. The tax compliance team will visit Modesto's other ZIP codes later.

The visits are part of a California State Board of Equalization compliance crackdown that began three years ago. The show-us-your-permit teams move from one ZIP code to the next, seeking businesses that don't have the required permits or licenses.

More than 261,000 California businesses have been visited, and about 2 percent of them were found to be violating sales-tax and use-tax collection laws.

About 2,100 Modesto businesses recently were sent letters warning that compliance teams would be visiting soon.

Bill Cardoza, a business tax specialist for the Board of Equalization, said businesses that don't collect, report or pay sales taxes have an unfair advantage over those that do follow the law.

Billions owed

The state estimates that those companies owe the state more than $2 billion a year in unpaid sales taxes.

"State law says you cannot sell any taxable item without paying sales tax," Cardoza said. Even if a business owner doesn't collect those taxes from customers, he said, they still are liable for paying sales taxes to the state.

Cardoza said six to eight members of the tax compliance team will start walking through Modesto's commercial neighborhoods Monday, and they will go into every business open to the public. When they find tangible products being sold, they will ask to see the businesses' seller's permits.

That includes service-oriented businesses that market just a few products on the side, such as beauty salons that sell shampoo.

The compliance teams will ask shop owners business-related questions, and Cardoza said they'll be on the lookout for companies that seem to be selling in volumes that don't match their tax records.

Businesses that are found to be out of compliance will be given instructions on how to register with the state Board of Equalization, and they'll be given information about other necessary licenses.

While some businesses require only a seller's permit, others need to register for additional state tax and fee programs. Cigarette retailers, for example, must have a special license to sell tobacco products.

Here is what compliance team members will do when they visit:

• Identify themselves and show identification

• Verify the existence of a seller's permit, fee permits and other business licenses and permits that may be required, including a city or county business license, if appropriate

• Review the businesses' licenses and permits to verify that they are updated with the correct information

• Provide guidance on reporting sales and use taxes properly

Businesses found to be operating without a seller's permit will be given applications and instructions on how to register. They will have to amend their tax returns.

Those who owe back sales taxes may be charged a 10 percent penalty for failing to file a return on time. They could be charged an additional 50 percent penalty if it is determined that they knowingly failed to obtain a permit so they could evade taxes.

Out-of-compliance businesses may end up being audited.

For more information, contact the Taxpayer Information Call Center at (800) 400-7115. To report a business that has not been paying its share of sales taxes, call the Tax Evasion Hotline at (888) 334-3300.