
Ask HN: Have you had a massive bill from the California Franchise Tax Board? - petenixey
After  diligently paying my Delaware taxes for the seven years I&#x27;ve had a company I was surprised to receive a letter (my first) from the California Franchise Tax Board telling me I owed them $64,000.<p>When I phoned up to check this they said that on recalculating it I owed $1,400 in taxes but another $8,600 in fines. However this was the first time they had contacted me. Seven years after the company was founded and with no prior invoices or notifications.<p>On speaking to one of the YCombinator founders last night I discovered that I&#x27;m not the only person this has happened to. Many businesses have been flipped over by the CFTB and forced to pay these fines with no prior warning.<p>Has this happened to you? Have you successfully fought it? If not how many of us are there?
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patio11
You should yell at your accountant. They should have seen this coming. (Early
in my relationship with my accountant, while he was getting his head around
the jurisdictional issues, he spent about 5 minutes grilling me about every
business trip ever to California and all of my clients there. "Look, you know
you're not a California business and I know you're not a California business
but the question is are we sure that California will come to the conclusion
that you're not a California business. They're real bastards about some of the
edge cases so I want to know if you're going to hit any.")

You have an accountant, right?

With regards to fighting the penalty: there's often a bit of play with
government offices particularly if you happen to bring the honest mistake to
their attention first and try to come in out of the cold. You might find that
tax offices take a sort of dim view about not filing taxes. I have yet to have
ever heard of a tax office which thinks "If you're not aware of the existence
of taxes, whoops, that was our bad."

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mrfusion
Hmm, how do I mention this to my accountant without sounding paranoid? Does a
SaaS company in another state need to worry about this? What about consulting
from another state?

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JohnHaugeland
"I read a story online about how a small business got hit with an unexpected
$64,000 bill for back taxes because the state of California determined that an
edge case applied to make it an in-state business. I realize this probably
doesn't apply to me, but would you please double check?"

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anthony_franco
This is what happened to my first company. We were incorporated in Delaware
but resided in California, so we were hit with a double tax bill and had to
pay retroactively.

For our current company, we decided to just incorporate in California and
everything has been much easier. I'd advise anyone looking to incorporate
Delaware, while based in California, to make sure it makes sense for their
company.

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smartician
What's your relationship with California? Do you have an office there? Do you
have employees that live in California?

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greendata
Curious are you physically located in California? I know that lot of states
are starting to claim you a "nexus" if you take a trip through them or do any
sort of business with them. It's a real problem if every state you touch tries
to claim your business and the taxes.

