The potential consequences for California businesses that fail to file zero sales tax returns when no tax is collected include:

1. Penalties and Fines: The California Department of Tax and Fee Administration (CDTFA) may impose penalties for failing to file returns on time, even if no tax is owed.

2. Interest Charges: Interest may accrue on any unpaid taxes from the original due date until the tax is paid.

3. Potential Audits: Repeated failure to file zero returns can trigger audits, leading to further scrutiny of the business’s tax practices.

4. Suspension of Seller’s Permit: The CDTFA may suspend the business’s seller’s permit, preventing it from legally collecting sales tax until compliance is achieved.

5. Increased Scrutiny: Ongoing non-compliance can lead to more frequent audits and increased monitoring by tax authorities.

6. Damage to Business Reputation: Consistently failing to file required returns can harm the business’s reputation with customers and tax authorities.

7. Liens and Garnishments: In extreme cases, the state can place liens on business assets or garnish bank accounts to recover unpaid taxes and penalties.

To avoid these consequences, businesses must file their sales tax returns regularly, even when no tax is collected, and maintain accurate records to support compliance efforts.