By Maria Koklanaris

Law360 (November 30, 2020, 8:19 PM EST ) California's governor on Monday announced a new package of temporary state tax relief for businesses, including allowing those who file less than $1 million in sales tax to defer remittance for three months.

Gov. Gavin Newsom, a Democrat, said California was trying to step in while states wait for federal lawmakers to reach agreement on passing additional relief to mitigate the crisis caused by COVID-19, the disease caused by the coronavirus. Earlier, California had given businesses with less than $5 million in total sales agreements to make payments without penalty and interest, and the governor said those agreements would be extended. He also said the state would expand interest-free payment agreements with certain larger businesses, including restaurants.

In addition, Newsom announced a new fund that would provide up to $500 million in grants for the smallest businesses throughout the state. He said businesses could apply for up to $25,000 each, and that nonprofits would be eligible as well.

On the sales tax deferral, the governor said businesses should think of it as a bridge loan. He said they could use the sales tax money for other needs until he and the newly elected legislature can get back into session and work on additional funding.

Eligible businesses "have collected sales taxes, and owe sales taxes of up to $1 million," Newsom said at a news conference. "This is in essence a float. You can hold that money. You can use that money to float any obligations you have. It's a deferral."

The deferral happens automatically for those businesses, Newsom said. For the businesses with less than $5 million in total sales, they can get extended interest and penalty relief by filling out a form, he said.

In a statement issued after the news conference, Newsom and Democratic leaders in the legislature pointed out repeatedly that the state was acting because the federal government thus far has not passed additional COVID aid after the Coronavirus Aid, Relief and Economic Security Act  in March.

"These are critical supports for the small businesses and services that keep our communities going," said Senate President pro tempore Toni G. Atkins, D-San Diego. "Now we need our federal partners to do their part and pass a federal stimulus so these businesses and nonprofits can survive 2020 and the year to come."

However, the Senate's Republican leader was not impressed. In a statement to Law360, Republican Leader Shannon Grove, R-Bakersfield, said the governor's announcement amounted to "window-dressing" and said it "ignores the overall problem of helping our small businesses stay alive. Delaying tax payments means the bill is still due."  

--Editing by Joyce Laskowski. 

Update: This story has been updated to include comments from California's Senate Republican leader. 

For a reprint of this article, please contact reprints@law360.com.