September 22, 2021
In a recent decision, the California Office of Tax Appeals held that taxpayers may not rely on erroneous or outdated information posted on the CDFTA's website.
The case, Waterford Irrigation Supply, Inc., California Office of Tax Appeals, No. 21017123, July 22, 2021, released September 2021, held that an irrigation equipment and supplies retailer was not entitled to a refund of sales and use tax because there was no legal basis for relieving or refunding tax based on taxpayer's reliance on erroneous or outdated information posted on the California Department of Tax and Fee Administration's (CDTFA's) website.
In this matter, the taxpayer made sales of irrigation products to farmers which qualified for the partial tax exemption for farm equipment and machinery. The taxpayer continued to charge and collect tax reimbursement from its customers unaware of the decrease in the partial tax exemption rate. The taxpayer claimed that it should be relieved of liability for any unreimbursed tax because it detrimentally relied upon outdated information posted on the department's website. The department argued that it had notified all sales and use tax accountholders of the change either by email or postcard, and by posting an informational notice on its website.
The Office of Tax Appeals stated that, as a matter of law, there was no statutory relief provision for taxpayers who detrimentally relied on erroneous or outdated information posted on the department's website. Additionally, the misrepresentations of an administrative official would not exempt a taxpayer, who relied upon them, from the obligation to pay the tax that is rightfully owed to the state. Therefore, the taxpayer's claim for refund was denied.
Waterford Irrigation Supply shows why it is essential that individuals and businesses work with their tax advisors to understand their tax obligations. When you aren't able to rely on information posted on an official government site it makes compliance difficult. Give us a call if you have tax questions or maybe need some information on different programs to bring you back into tax compliance.