Addressing the Tax Gap

The “tax gap” is the difference between taxes owed and taxes paid to the State of California.  The Sales and Use Tax – the largest tax administered by the Board of Equalization – has an estimated gap of over $2 billion dollars.

In 2007, we implemented a plan designed to reduce the tax gap by improving BOE’s on-going audit and collection programs, collecting use tax from in-state service businesses, and expanding collection on bankruptcy and out-of-state accounts.  Some of our other tax gap programs include:

  • Franchise Tax Board use tax line – provides a line on California income tax returns to report use tax
  • Qualified Purchaser Program – requires service businesses that make at least $100,000 in gross receipts to register with BOE to report use tax
  • Voluntary Disclosure Program – allows taxpayers to come forward to register and pay use tax liabilities  with a shortened look-back period of 3 years
  • Statewide Compliance and Outreach Program (SCOP) – focuses on identifying and registering businesses who are actively selling tangible personal property in California without a seller's permit
We are reviewing ideas for improving these programs as well as ideas for new tax gap efforts. For more information, see:

For questions about the tax gap or to share your ideas, email us at TaxGap@boe.ca.gov