Taxpayers Object to CDTFA’s Lack of Transparency and Other Problems During Taxpayers’ Bill of Rights Hearing


Taxpayers appeared at the California Department of Tax and Fee Administration’s Taxpayers’ Bill of Rights hearing September 28 to voice concerns with the agency’s practices, including a lack of transparency and changes being made to procedures without an accompanying change in state law.

The annual Taxpayers’ Bill of Rights hearing provides a forum for taxpayers to present ideas, concerns, and recommendations to the agency. This year, 10 taxpayers, including CalTax staff, presented testimony.

CalTax staff raised several issues, including the agency’s recent change in its interpretation of where a sale is deemed to take place for the purpose of allocating sales tax revenue. Historically, the State Board of Equalization and the CDTFA found that the Bradley-Burns portion of sales tax revenue should be allocated based on the location where principal negotiation takes place. However, CDTFA staff have begun to apply a new standard.

“This new standard, unsupported by any change in state law, requires ‘meaningful human intervention’ to occur,” CalTax Legislative Aide Tobias Wolken testified. “The CDTFA is using this newly created standard retroactively, which ties up revenue that would otherwise be spent on services in communities where these businesses are located.”

CalTax Sales Tax Consultant Joan Armenta-Roberts said the agency’s six-month deemed-denial rule for refund claims is unfair to taxpayers. Unlike the Franchise Tax Board, which allows taxpayers to appeal to the Office of Tax Appeals or go to court if the agency fails to take action on a refund claim within six months, the CDTFA requires taxpayers to take action in court. Armenta-Roberts noted that if the CDTFA aligned its rules with those used by the FTB, taxpayers would be afforded more options in appeals and would not have to pay to go to court.

Armenta-Roberts also said the CDTFA’s regulatory process should be revamped to provide oversight and accountability of CDTFA staff.

“Currently, the [CDTFA] Business Taxes Committee presents their proposed amendments, holds the interested parties’ meetings, and makes all of the decisions …,” Armenta-Roberts said. “There should be an unbiased third party that reviews and makes decisions on proposed amendments.”

Armenta-Roberts also pointed out two flaws in the agency’s legal briefs. First, when the Tax and Fee Programs Bureau disagrees with aspects of the Appeals Bureau’s decisions, it is not required to notify the taxpayer prior to the due date of the taxpayer’s opening brief. Second, the CDTFA does not provide complete opening briefs to the OTA. Armenta-Roberts requested that the agency look into these issues and make changes to provide transparency and fairness to taxpayers.

Molly Burns, environmental affairs manager at Dunn-Edwards Corporation, noted that the environmental fee levied on businesses disposing of hazardous materials has increased 219 percent. Burns said businesses were required to remit the fee with minimal notice.

Other taxpayers expressed concerns with overlapping taxes on cannabis, the agency’s offers-in-compromise formula, and the assessment of a restaurant whose owner alleged unfair treatment.