Other Tax Information

Internet sales tax

There is no general tax exemption for sales made over the Internet.

If your business is located in California, your Internet sales of physical products are generally taxable, unless they qualify for specific exemption. For sales tax purposes, Internet sales are treated like sales made at stores, through sales representatives or by mail order.

Some Internet sales that are exempt from sales tax include sales for resale, sales of cold food products, and sales of merchandise delivered outside of California. Also exempt are products electronically transmitted to customers  such as software, data and digital images. If you provide a hard copy (like a CD or floppy disk) in addition to electronic transmission, the sale is usually taxable.

Retention of tax records

How long should you retain your personal income tax records? These records may have to be produced if the Internal Revenue Service (or a state or local taxing authority) were to audit your return or seek to assess or collect a tax. In addition, lenders, co-op boards, or other private parties may require that you produce copies of your tax returns as a condition to lending money, approving a purchase, or otherwise doing business with you.

Keep returns indefinitely and the supporting records usually for six years. In general, except in cases of fraud or substantial understatements of income, the IRS can only assess tax for a year within three years after the return for that year was filed (or, if later, three years after the return was due). For example, if you filed your 2003 individual income tax return by its original due date of April 15, 2004, the IRS would have until April 15, 2007 to assess a tax deficiency against you. If you filed your return late, the IRS generally would have three years from the date you filed the return to assess a deficiency.