California State Board of Equalization is Increasing Criminal Prosecutions. What You Need to Know If You Received a BOE-1246-B Letter, FINAL NOTICE BEFORE PROSECTION

David Holtz — Thu, 06 Aug 2009 17:56:50 +0000

BOE-1246-B Final Notice Before Prosecution

On May 13, 2008, the Chief Counsel of the State Board of Equalization issued its legal opinion supporting the Board’s program to pursue criminal violations of Revenue and Tax Code Section 6071 (engaging in a sales business without a valid California seller’s permit) by using the Board Investigation Division employees rathar, than exclusively pursuing prosecution by referring violations to the District Attorney’s office. As result of this program, the California State Board of Equalization has recently increased the volume of taxpayer’s that are being pursued criminally for violations of section 6071. If you have received a BOE-1246-B Letter, FINAL NOTICE BEFORE PROSECUTION, from the California State Board of Equalization (“BOE”), then the BOE is in the process of pursuing you under this program.

It is a crime in California punishable with a fine of up to $5,000 and/or a sentence up one year in jail for engaging in a business without a valid California seller’s permit. In particular, pursuant to Revenue and Taxation Code Section 6071 and 7153:

Any person who engages in a business as a seller in the State of California without a valid California seller’s permit is guilty of a misdemeanor punishable by a fine up to $5,000 and/or sentenced up to one year in jail for each violation.
Each officer in a corporation that is violating this law may also guilty of a this crime punishable by a fine up to $5,000 and/or sentenced up to one year in jail for each violation.

Failure to have a valid seller’s permit commonly occurs after the State Board of Equalization revokes or suspends a seller’s permit on the basis that sales tax returns have not been filed and/or sales and use taxes has not been paid. However, it also occurs where a seller fails to obtain a seller’s permit.

David C. Holtz, J.D., LL.M., Former IRS Attorney

The issuance of the BOE-1246-B Letter, FINAL NOTICE BEFORE PROSECUTION, is a part of a criminal prosecution program intended to encourage compliance with the sales tax laws in the State of California. The State of California has announced that it will refer a case for criminal prosecution approximately 4 months after the account was revoked, or appoximately 9 months after the account became delinquent.

If you have received the BOE-1246-B Letter, FINAL NOTICE BEFORE PROSECUTION, then you are in the process of being referred for prosecution for violation of the sales tax laws. In order to avoid referral for prosecution, the tax law compliance dispute with the State Board of Equalization must be resolved quickly.

If you do not resolve the matter with the State Board of Equalization, then your case will be referred to the Criminal Investigation Division and a California BOE-1248-B Letter, NOTICE OF REFERRAL FOR CITATION AND PROSECUTION, will be issued.

In approximately 30 days after being referred to the Criminal Investigation Division, your case will be assigned to a criminal investigator. The investigator will verify that sufficient criminal knowledge and intent exists. The investigatory will interview you and provide you with a pamplet entitled “Criminal Prosecution for Failure to Possess a Valid California Seller’s Permit” providing you five business days to remedy non-compliance before being prosecuted.

In addition to the above penalties and jail time, you may be liable for the sales taxes, interest and other civil and/or criminal penalties.

Caution: If you have other audit risks because of non-compliance with other tax laws such as federal or state income tax or employment tax laws, then this prosecution program may expose your books and records to further scrutiny.

Caution: You have rights and privileges which may be waived if you do not take proper steps protect yourself in this proceeding, such as the 5th Amendment Protection Against Compelled Self-Incrimination. A waiver of such rights during this proceeding may be viewed as waiver for other proceedings and may have very broard negative impact.

Before prosecution for a suspended or revoked California Seller’s Permit, it is the State Board of Equalization policy to issue notices in the following order:

Before prosecution for a sales without a California Seller’s Permit, it is the State Board of Equalization policy to issue notices in the following order:

Legal Material:

California Revenue & Taxation Code Section § 6071 – Doing business without permit:

A person who engages in business as a seller in this state without a permit or permits or after a permit has been suspended or revoked, and each officer of any corporation which so engages in business, is guilty of a misdemeanor, punishable as provided in Section 7153.

California Revenue & Taxation Code Section § 7153 — Grade of offense; Punishment.

Any violation of this part, except as otherwise provided, is a misdemeanor. Each offense shall be punished by a fine of not less than one thousand dollars ($1,000) and not more than five thousand dollars ($5,000), or imprisonment not exceeding one year in the county jail, or both the fine and imprisonment in the discretion of the court.

Other Helpful Material:

California Seller’s Permit Application, Publication BOE-400-SPA

Author: David C. Holtz, J.D., LL.M., Former IRS Attorney

If you have any questions, please call (310) 550-6200.

Copyright © David C. Holtz 2009. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts of text and links may be used, provided that full and clear credit is given to David C. Holtz with appropriate and specific direction to the original content at www.HSDTaxLaw.com.

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California State Board of Equalization is Increasing Criminal Prosecutions. What You Need to Know If You Received a BOE-1246-B Letter, FINAL NOTICE BEFORE PROSECTION