Putting Your Money Back in Your Pocket– A Message By Michelle Steel, Vice Chair of the State Board of Equalization
One of the constant challenges for small-business owners is cash flow, particularly in the first years of operation.
For years, many new business owners faced the burden of registering for a seller’s permit with the Board of Equalization only to discover that they had to post thousands of dollars in the form of a security deposit with the agency. The deposit was supposed to act as collateral for future liabilities, but it was an expense that most new businesses – hungry for scarce capital – could do without.
California businesses already had enough to worry about without having to send their much-needed capital to Sacramento in the form of a needless security deposit.
As your representative on the Board, it had long been a goal of mine to eliminate the automatic security deposit program. I’m happy to report that I have succeeded in fulfilling that goal.
On December 17, 2013, my colleagues and I voted to eliminate the automatic requirement for security deposits. And beginning in February, the BOE will release almost half of the $296 million in security deposits that it currently holds– $67 million of which is cash and liquid assets – back to business owners.
Before our vote, the Board of Equalization placed a heavy burden on many new businesses by requiring them to make a significant security deposit, which varied between $2,000 and $50,000 depending on sales volume, when applying for their seller’s permit. Under my leadership, the Board of Equalization determined that the costs outweighed the benefits of this program. It wasn’t efficient; it wasn’t good business.
Unfortunately, the BOE does not have the ability to eliminate all security deposits because existing laws require some businesses, such as those that sell cigarettes, to post mandatory security deposits. However, the Board’s action goes a long way towards providing much needed relief to new business owners and in turn, increases the possibility of new businesses and ventures flourishing in this great state of California. I am very proud of this accomplishment and its benefits to the business communities I represent.
If you have comments or questions about the security deposit refund process, or if you believe that you may qualify for the security deposit refund, please contact my office at (949) 724-2578 for assistance.
Michelle Steel is the Vice Chair of the State Board of Equalization, and your elected representative for the third district.