County of San Diego , Cal.
Although the First American court acknowledged that the situation presented a sympathetic case for cancelation of the penalty because the taxpayer missed the payment due to an inadvertent error and corrected the problem as soon as possible after the error was discovered, the penalty was sustained because the taxpayer failed to present any grounds meeting the statutory requirements for abatement. So, what are taxpayers to do when they find themselves in the undesirable position of having missed a property tax payment?
Well, if the amount at issue is substantial, the first thing taxpayers should do is obtain legal counsel familiar with the nuances associated with property tax scheme. The law provides a means for abatement of delinquency penalties when the failure to pay timely is due to reasonable cause, or when there was an inadvertent error in the amount of payment.
In addition, we have had tremendous success helping clients abate late payment penalties due to procedural errors by the tax collector. Thus, if a taxpayer finds itself in a situation where it may be facing a late payment penalty, it should immediately engage competent counsel to help it present the circumstances — from the onset — in a manner that establishes the factual predicates described in the statutes that will lead to cancellation of the penalty, as failure to do so will lead to imposition of the penalty.
As we previously reported, in , California added a significant penalty for failing to submit timely changes in control statements.
What is the PCOR?
In general, when a corporation, partnership, limited liability company, or other legal entity obtains control through direct or indirect ownership or control of more than 50 percent of the voting stock of any corporation that is not a member of the same affiliated group, or obtains a majority interest in capital and profits in a partnership or limited liability company, or obtains a majority interest in any other legal entity, including any purchase or transfer of 50 percent or less of the ownership interest whereby control or a majority ownership interest is obtained, the purchase or transfer is a change in ownership of property and is subject to reassessment.
Although most entities are well advised of their reporting obligations when acquiring other entities or when performing some form of corporate reorganization, in the context of a family trust, a reassessable change in control often is not noticed until well after the effective date.
In this situation, if a change in control has occurred, the 10 percent penalty would apply even though there was no way to know within the 45 days that there was an obligation to file.
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Moreover, because language in the statute for abatement of the failure to report penalty is similar to that examined by the courts for abatement of the late payment penalties, it is quite possible that the courts will take a similarly hard stance against taxpayers seeking abatement of this penalty as well. Unlike the change in control statement, discussed above, which is filed with the BOE, a change in ownership statement is filed with the local assessor.
The courts have strictly enforced the 10 percent late payment penalty, so taxpayers should engage counsel immediately if they miss a payment because it is critical that the taxpayer frame its position in a manner that meets one of the tests that will eventually lead to abatement. With regard to the penalty for an untimely change in control statement, there is no reason to believe that the courts will be any more lenient when enforcing this penalty than they are enforcing the late payment penalty.
Follow us on Twitter twitter. Includes link that functions only if your phone has internet access. Although California has enacted similar legislation, there is an exception for delivery network companies. Accordingly, we do not believe it is appropriate for Uber Eats to collect sales tax on delivery fees from our users in California at this time.
Winston & Strawn LLP: Avoiding California’s Property Tax Penalties
We are deeply committed to compliance, which includes ongoing assessment of developments in local legislation and state-issued guidance. In recent years, local lawmakers have increasingly scrutinized the tech industry. For example, more states are now charging sales tax on products that are purchased online.
Amazon largely skipped out on collecting sales tax for third-party seller products until a few years ago when it was facing state regulations to do so — but by then it was already the top online retailer. Uber ignored licensing rules in many states but became the leading ride-hail company in the meantime. And Airbnb delayed its obligation to collect taxes and enforce zoning rules by suing several cities where it operated.
Internet Sales Tax Fairness — Click-Through Nexus — California
In all those fights, regulators were slow to keep up with tech companies, which took advantage of that to quickly become market leaders, meaning they could afford costly legal battles. But in an era when tech is facing a reckoning with the public and increased political scrutiny, that might change, and regulators may start applying stricter rules to companies like DoorDash and Postmates.
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