Laguna restaurateur gets tax deposit money back

Board of Equalization Member Michelle Steel came to Laguna Beach Dec. 18 to rectify a multi-million dollar mistake in tax refund procedures that she said has cost more than 600 Southern California businesses close to $4 million.

Steel gave a $21,000 check to the owner of San Shi Go sushi restaurant — a refund of a security deposit on sales taxes the business made to the state when it opened its doors. Another Orange County business received $10,000 to refund a similar deposit.

Steel’s office handles tax issues for the lower quarter of the state, from Palos Verdes to San Diego. Steel represents some 8.5 million taxpayers in the Third Board of Equalization District.

Steel discovered the state is withholding millions in pre-tax payments from new businesses after receiving a call from a San Diego small business. Steele is warning businesses that the scope of the state’s refund problems is likely to quadruple, affecting several thousand businesses statewide with damages of tens of millions of dollars.

“California’s sales tax agency has made a multi-million dollar mistake by wrongly withholding tax refunds from California’s small businesses,” Steel said. “I have documented evidence of at least 600 tax victims in just my district alone, and that number could easily quadruple.”

Under state law, certain businesses can be required to pay and maintain a tax security deposit, ranging from $2,000 to $50,000, during their first three years of operation. Steel’s investigation revealed refund delays ranged from several months to as long as three years. Steel, who was limited to her district — about one-fourth of the state — found roughly $4 million withheld from more than 600 businesses.

In the case of San Shi Go, the business had its deposit withheld for three years after it should have been returned — and it was returned without interest.

Last month, Steel ordered all Third District Board of Equalization offices to immediately review all business accounts and release all eligible security deposits. Since that time, close to $1 million has been returned back to taxpayers.

Beginning Jan. 1, The Board of Equalization Third District instituted a Business Cashback Program Tuesday, where every month board staff will review eligible security deposits for release. At the Board of Equalization’s meeting in January, Steel will also urge the agency to launch a statewide investigation and apply the “Business Cashback Program” statewide.

Taxpayers in need of assistance, including the review of their tax account, can call Steel’s toll-free, tax helpline at (866) 910-9558.