Cumulus Bookkeeping & Consulting

Does Your Business Add a Surcharge?

In California, a retailer owes tax based upon their gross receipts on retail sales (that is, sales to consumers). Gross receipts include all amounts received with respect to a sale, with no deduction for the cost of the materials, service, or expense of the retailer (you) passed on to the purchaser (your customer), unless there is a specific statutory exclusion.

If you separately add a surcharge to your taxable sales, whether it be a flat fee or a percentage of the selling price, tax generally also applies to the surcharge amount. Surcharges have various titles, such as a merchant card processing fee, healthcare surcharge, COVID-19 surcharge, wage increase fee, inflation fee, tourism fee, fuel surcharge, paid sick leave fee, restaurant surcharges, or other such charges.

Read more here: https://cdtfa.ca.gov/lawguides/vol1/sutl/6012.html

Sales And Use Tax Law - Section 6012 The mission of the California Department of Tax and Fee Administration is to serve the public through fair, effective, and efficient tax administration

TLDR: Make sure you have your mileage expense logs updated as they happen!

From The General Ledger, the newsletter produced by the American Institute of Professional Bookkeepers:

"Business Owner Fails to Prove Travel Expenses"

The case: A real estate consultant and broker worked as an independent contractor. He deducted a significant amount of travel expenses on his Schedule C. The IRS denied most of the travel expense deductions.

Held: For the IRS. The taxpayer provided three separate travel logs—but all three were created after the tax dispute began. The first log was constructed from memory after the IRS’s assessment. The second was created after the taxpayer went through his bank and credit card statements and receipts. The third log was not explained.

The court said none of the logs contained any data that connected the expenses incurred to the taxpayer’s work. Nor was there substantiation of the clients involved, business topics discussed, or anything else related to the taxpayer’s work. He also conceded that he had made personal as well as business trips and provided no basis on which to separate the two.

Also, because the travel logs were created after the IRS began examining the tax returns, the taxpayer did not meet the requirement to keep adequate and contemporaneous records of his travel expenses as they were incurred. [Franklin v. Comm., T.C. Memo. 2020-127]

Santa Rosa-based businesses... please take note.

Santa Rosa Minimum Wage Starts July 1 Starting July 1, 2020, the City of Santa Rosa’s local ordinance increasing minimum wage will go into effect. This increase is estimated to assist over 25,000 people who work within Santa Rosa city limits by providing them with greater economic stability while increasing consumer spending for the e...