This spring thousands of business owners throughout California are receiving a welcome surprise in their mailbox. Rather than a notice of a new tax, fee or audit, they’re getting a check from the State Board of Equalization.

No, we’re not talking about annual income tax refunds from the Franchise Tax Board. These checks are marked “SECURITY REFUND” and represent a dramatic shift in how California’s elected tax board welcomes new businesses to our state.

Previously new corporations and LLCs were forced by the BOE to turn over anywhere from $2000 to $50,000 of their own money as security before they could make a single legal taxable sale. This “security” was held just in case a business might default on its taxes during its first three years of operation.

It was a uniquely California-style shake down. Rather than encourage new business start-ups, the government robbed them of the capital they needed to be successful, only to sit on it for three years before returning it.

I took a close look at the program and found it didn’t make sense for taxpayers or the state. Security was rarely applied, and staff time and energy were needlessly… Read More