California State Tax Defense — FTB, EDD, and CDTFA

The Office of Tax Appeals (OTA) is California's independent tax tribunal, established January 1, 2018, replacing the old State Board of Equalization hearing function. OTA hears appeals of FTB personal income tax and corporation tax assessments, CDTFA sales and use tax and fee determinations, and certain other state tax agency actions. OTA panels consist of three administrative law judges. Taxpayers have 30 days from the FTB's Notice of Action (denying a protest) to file an OTA petition, and 30 days from a CDTFA Decision and Order to appeal. Decisions can be appealed to California Superior Court under a de novo standard of review.

Generally no — but California aggressively audits residency and domicile claims. Non-residents owe California income tax only on California-source income: wages for work physically performed in California, income from California real estate, and business income from California operations. However, the FTB uses a comprehensive 'nearest and dearest' domicile test to determine whether someone who claims to have left California actually did so. Factors include: location of principal home, spouse and minor children, close personal friends, church/civic memberships, recreational property, banking relationships, and prior domicile. Simply obtaining a Nevada or Texas driver's license and registering to vote is not sufficient to establish a new domicile.

Following South Dakota v. Wayfair (2018), California enacted economic nexus thresholds: out-of-state sellers have California sales tax nexus if they exceed $500,000 in California sales in the prior or current calendar year. No transaction count threshold applies — only the dollar threshold. The CDTFA can assess back taxes, interest, and a 25% penalty for failure to register plus a 10% late filing penalty, compounding rapidly on prior-year liability. Voluntary disclosure is available to limit lookback periods and penalty exposure before an audit begins.

The FTB's standard assessment statute of limitations is 4 years from the later of the return's original due date or the date actually filed (Revenue and Taxation Code § 19057). This is longer than the IRS's 3-year window under IRC § 6501. If the FTB claims substantial understatement of income (more than 25% of gross income omitted), the statute extends to 8 years. There is no statute if no return was filed, or if a fraudulent return was filed. California's collection statute is 20 years from assessment (§ 19255), compared to 10 years for the IRS — meaning California can pursue tax debt for two decades after assessment.

Yes — both agencies have responsible party assessment authority. The FTB can assess unpaid corporate or LLC taxes against officers, members, or responsible parties under Revenue and Taxation Code §§ 19719-19736 in limited circumstances, primarily for fraudulent transfers. The EDD's responsible party liability (Unemployment Insurance Code § 1735) is broader and mirrors the IRS Trust Fund Recovery Penalty: any officer, member, or other person with authority over payroll decisions who willfully failed to withhold or remit California payroll taxes can be assessed personally. Personal assessment survives bankruptcy in most circumstances.