Franchise tax board issue (Calif.)

campbellcj · 10-26-2007, 06:01 PM

Almighty OT Pelicans. I have landed in a bit of a pickle (fortunately not a huge one) with the California Franchise Tax Board. Seeking any and all advice.

Several years ago, I set up an S-Corp for the purposes of facilitating a new business venture/transaction that never took place. The corporation has never had revenues, expenses, employees, assets, credit or anything else. When the deal evaporated I pretty much forgot about it. I also never thought that I needed to either dissolve the corporation or file "dummy" tax returns for it. Since it was completely idle I figured I could just let it sit there and maybe someday use it for some kind of side busines.

Well, now the FTB is hitting me up for past years' returns and trying to extort $800/yr minimum business tax from me, even though the corporation has never done any business in this state or anywhere. (I have no idea what this tax is for, since it is not an income tax, but that is a topic for another thread.)

Not sure if I have any options here but to bend over and pay? I could probably tie it up in protests and paperwork for a while, but if they are seriously going to chase me over this BS, they could go after a lien or garnish my wages I suppose.

Hugh R · 10-26-2007, 06:28 PM

When I quit consulting, I dissolved my S corp over that $800/year issue. I don't believe there is an exception that you can use. Its the minimum corporate tax in CA.

Sonic dB · Sonic dB's Garage

Talk with a good tax accountant who is familiar with the CA business laws.

Yes the $800 is a minimum corp tax in CA, payable every year no matter what
as long as your company is registered in CA...and regardless of whether you have a single CA customer or ever do business in CA...the Franchise board will assume that you do and you get charged at least that $800 fee no matter what, and it goes up from there depending on the corporation revenue. So talk with a tax pro, perhaps there is an appeals process where you can show your case and how you have not produced any revenue from the company...however they may just throw back at you that you should have dissolved the company officially then... good luck!

Don Plumley · Don Plumley's Garage

Been there, paid that. You'll owe taxes and penalties. Do not pass go.

Dantilla · 10-26-2007, 08:46 PM

Recently, I was looking at some business opportunities in other states. I briefly considered something in California until I looked at the tax structure.

No thanks. I'm not investing one dime in California.

911Rob · 911Rob's Garage

Shhhh..... please don't mention my name to any tax guys you speak to.

Yes, both my Porsche purchases and both my brand new Rinkers were tax right offs. I entertain millionares for a living.

Sorry for your loss to Uncle Sammy

59GS · 10-27-2007, 10:38 AM

... read the owner's manual

+87gazillion on Dantilla's comment. Jack Sparrow was apparently elected to some high office here in Cali.

WolfeMacleod · 10-27-2007, 10:48 AM

Wow. Remind me not to move to Ca.

Here in WA, I've never owned any business taxes. I just do all my business out of state.

campbellcj · 10-28-2007, 09:17 AM

Thanks for the comments guys. Yuck. I guess I just need to bend-over and deal with this. I figure if I catch-up one year at a time that will spread out the pain and show some good faith progress to the State to hopefully keep them off my back.

Zeke · 10:22 AM

I'd schedule a meeting with the FTB. At the very least, you may avoid any penalties. This worked for me when I was hit up for some use tax on a car I flipped. I paid the principal tax, but the penalties were waived. I even did this on the phone! You may do better.

Edit: Of course, that was the DMV, but the point is the same.