How to Download California Compliance Policy and Procedures Manual - Chapter 4, Security PDF
The California Department of Tax and Fee Administration (CDTFA) is required to obtain or authorized to impose a security deposit from a permit or license applicant subject to certain limitations. The various tax and fee programs administered by the CDTFA have unique security deposit requirements. The table in CPPM 405.030 summarizes the applicable minimum and maximum security deposit amounts for other programs than the sales and use tax program. Revenue and Taxation Code (RTC) section 6701 authorizes the CDTFA to require “any person” subject to sales and use tax law to post a security deposit to help ensure compliance. For sales and use tax accounts, the minimum amount for a security deposit is $2,000. The maximum amount by statute may not exceed $50,000. The security deposit requirement follows the person, not the account. Therefore, if a person has posted a security deposit or deposits totaling $50,000 and opens another business under a new seller’s permit, no additional security may be requested. The security provisions for tax and fee programs where security is not mandatory, must be judiciously administered. All relative factors will be considered when setting the amount of security to be posted and unusual or excessive demands should not be made. (See CPPM 405.020 for security deposit policy for new accounts.) When a security deposit is required, the taxpayer is given a copy of the CDTFA–598, Notice of Security Requirements, and from the types listed, allowed to select the security deposit best suited to the taxpayer’s circumstances. The taxpayer should be given a reasonable length of time (normally 30 days) to post the deposit. A security deposit may also be made in installments (CPPM 410.010). In these cases, the 30-day period may need to be extended. However, if the taxpayer fails to post the deposit within the timeframe allotted, the account will be scheduled for revocation (See CPPM 340.000). Issuing a seller’s permit will not be delayed pending receipt of a security deposit.
