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California military tax break was publicized but not delivered

By Morgan Cook | The San Diego Union-Tribune | Published: January 18, 2016

SAN DIEGO (Tribune News Service) — An erroneous news release put out by a state tax board and posted on its website for months is causing confusion for military personnel who thought the state was giving them a tax break — then found out later they owe money.

The state Board of Equalization has received multiple complaints from active-duty members of the military who say they didn’t fully understand the state’s “use-tax” exemption for military personnel transferring to California on orders.

Board member Diane Harkey said her office is trying to help a member of the military who was ordered to move to San Diego, and bought an RV ahead of his report date, thinking he had done everything right to qualify for a tax exemption on his vehicle.

When the service member tried to register the RV in California last spring, he was assessed more than $5,000 in use tax.

It turns out the Oct. 13, 2013 news release on the board’s website, which the taxpayer said he had relied upon for eligibility requirements, was erroneous and left out key information. The taxpayer has appealed the assessment, but has been unable to get it waived.

“We and the agency (staff) have agreed that this is misworded; it’s not worded correctly,” Harkey said of the release. “He (the taxpayer) put all this work in, and he tried to follow instructions. I am so sorry he has to go through this.”

The news release says the exemption applies to vehicles purchased outside of California, and “the use of the vehicle in California is due to a transfer order, and not their own decision.” It says property must be purchased “less than 90 days before the report date on their transfers.”

In reality, the exemption applies to vehicle purchased outside California before receipt of transfer orders — not before the “report date,” which is stated on the transfer orders and indicates the date they must report for duty.

Instead of taking the release down or correcting it as soon the taxpayer reported the problems last spring, staff left it on the website until Jan. 7, when it was removed at Harkey’s request. Another inaccurate version of the release was left on the website by mistake until Jan. 13.

A spokesman for the board said he couldn’t confirm when staff first knew of errors in the news release, but word didn’t reach the public affairs office in charge of news releases until Harkey’s office contacted them.

Information produced by the tax board and posted on its website might seem like official information, but it doesn’t necessarily qualify as official advice.

“If a taxpayer requests tax advice in writing from the BOE and receives written tax advice from the BOE that is incorrect, the BOE has the authority to waive the tax, interest, and penalties that may be due as a result of the taxpayer’s reasonable reliance on the incorrect tax advice,” Aaron Bone, spokesman for the tax board, wrote in an email response to U-T Watchdog.

Use tax is a tax paid by people who purchase personal property, such as vehicles, outside the state for use in California. It essentially takes the place of sales tax, which California doesn’t collect for property purchased from out-of-state merchants who don’t sell things in California. A single transaction is typically subject to sales tax or use tax, but not both.

California exempts certain taxpayers from use tax under certain circumstances. Generally speaking, if an active-duty service member is transferred to California on military orders, California allows an exemption for use tax on property purchased a certain amount of time before the service member received their transfer orders.

©2016 The San Diego Union-Tribune
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