Sales & Use Tax

Sales tax delinquencies do not just create financial exposure. They threaten the existence of the business itself.

For business owners, sales and use tax compliance is one of the most operationally critical — and most frequently underestimated — areas of tax obligation. Unlike income taxes, which are assessed after the fact, sales tax is collected from customers in real time. It is trust fund money — belonging to the state from the moment it is collected — and the state’s response when it is not remitted is swift, aggressive, and in California, among the most punishing in the country.

At Blackridge Tax, we represent businesses facing sales and use tax delinquencies, audits, and enforcement actions before the California Department of Tax and Fee Administration and state tax authorities across multiple jurisdictions — with the same strategic depth and senior-level attention we bring to every matter we handle.

Understanding Sales Tax Obligations

Businesses that sell taxable goods or services are required to collect sales tax from their customers and remit those collections to the state on a prescribed schedule — typically quarterly, though high-volume businesses may be required to file monthly. The obligation is not limited to what was collected. It extends to what should have been collected — meaning that a business that failed to charge sales tax on taxable transactions may still owe the full tax amount to the state.

Like federal payroll taxes, sales tax collected from customers is considered trust fund money. It belongs to the state from the moment it is collected — the business holds it temporarily and is legally obligated to remit it. When a business uses those funds for operating expenses instead — a decision that often begins as a temporary cash flow measure — the state’s response is not limited to the business entity.

In California and many other states, responsible individuals can be held personally liable for the unpaid trust fund amounts — exposing the personal assets of business owners, officers, and those with financial control over the business.

What Happens When a Business Falls Behind

Sales tax delinquencies escalate with a speed that surprises many business owners. A single missed filing triggers penalties. A pattern of non-filing triggers something far more serious.

When a business fails to file sales tax returns, the state does not simply wait. It estimates the business’s sales volume — using industry averages, prior period filings, or other available data — and assesses tax based on that estimate. These estimated assessments are almost always significantly higher than the actual liability — and they carry the full weight of a formal assessment from the moment they are issued.

Once an estimated assessment becomes final it is extremely difficult to challenge. The burden shifts to the business to prove that the actual liability is lower — which requires producing the very records the business failed to maintain or submit in the first place. At Blackridge Tax, we intervene before assessments become final whenever possible — and when they already have, we pursue every available avenue to challenge, reduce, and resolve them.

Operational & Existential Consequences

Sales Tax Permit Revocation

The state can revoke or refuse to renew a business’s sales tax permit. Without a valid permit, the business cannot legally operate. For retail businesses and restaurants, permit revocation is a shutdown.

Business License Suspension

Many licensing boards—including those governing contractors, healthcare, and financial professionals—require proof of tax compliance. A delinquency can trigger proceedings that put an entire professional practice at risk.

Liens & Levies

State tax authorities can file liens against business and personal assets, levy bank accounts, and seize inventory—often with less procedural notice than the IRS.

Personal Liability

In California, the CDTFA has the authority to assess owners and officers directly for unpaid trust fund sales taxes. This liability can follow individuals long after the business has closed.

Use Tax — The Overlooked Obligation

Use tax is the complement to sales tax — and one of the most commonly overlooked tax obligations facing businesses today. Use tax applies when a business or individual purchases taxable goods or services without paying sales tax — typically in out-of-state or online transactions where the seller did not collect California sales tax.

The purchaser is responsible for self-assessing and remitting use tax directly to the state. Most businesses are unaware of this obligation until they are audited — at which point the assessment covers multiple years of untaxed purchases, plus penalties and interest.

At Blackridge Tax, we represent businesses in use tax audits, challenge indirect estimation methodologies, and negotiate settlements that reflect the actual tax owed rather than the state’s inflated estimates.

Multi-State Sales Tax Obligations

Following the Supreme Court’s 2018 decision in South Dakota v. Wayfair, a business with sufficient economic activity in a state is now required to collect and remit that state’s sales tax even without a physical location there.

For businesses that have been selling into multiple states without collecting sales tax, the potential exposure can be substantial. At Blackridge Tax, we evaluate multi-state exposure comprehensively — identifying every state where nexus exists and pursuing the most favorable resolution available, including voluntary disclosure where appropriate.

The California CDTFA — What Business Owners Need to Know

The California Department of Tax and Fee Administration is one of the most aggressive state tax collection agencies in the country. CDTFA auditors are experienced and increasingly sophisticated in their use of indirect audit methods — statistical sampling, markup analysis, and purchase ratio testing.

Note: Indirect audit methods can produce assessments that bear little resemblance to a business’s actual liability. We challenge these methodologies and present the actual records and evidence that support the correct liability.

Resolution Options — State Tax Authority Negotiation

We pursue the resolution strategy that produces the most favorable outcome for each jurisdiction:

Installment Agreements: Structured payment arrangements offered by the CDTFA and FTB to address liabilities over time.
Offers in Compromise: Formal compromise programs (distinct from federal OIC) that allow for settling liabilities for less than the full amount owed.
Voluntary Disclosure: proactive opportunities for businesses not yet contacted by the state to come forward in exchange for reduced lookback periods.
Audit Reconsideration & Appeals: Formal processes to challenge inaccurate assessments, factual errors, or overstated liabilities.

The Blackridge Standard

Blackridge Tax represents businesses and individuals facing sales and use tax delinquencies involving $50,000 or more in state tax liability. Our team includes a Board Certified Tax Specialist, attorneys licensed in six states, a CPA, and an Enrolled Agent.

Sales tax compliance is not optional — and neither is the expertise required to resolve it when things go wrong.

Next Steps

Protect your business and personal assets.

Resolve CDTFA audits and state sales tax delinquencies with senior-level strategy.