California will be very accepting of its own IOUs: state will take scrip as payment of companies' sales and use levies.

VENDORS and contractors who got paid this month with state-backed IOUs are getting a break: They can submit IOUs as payment of their taxes on sales and use.

The state Board of Equalization, which collects sales and use taxes from companies, made the announcement last week.

On July 1, the state began issuing IOUs to vendors and contractors as a way to conserve cash. The IOUs have been problematic for some vendors and contractors because of questions on how to bank them.

A vote on the proposed budget deal was pending at press time last week; however, there was no announcement regarding when the state would stop sending out IOUs and resume cash payments to contractors and vendors.

Meanwhile, Anita Gore, spokeswoman for the Board of Equalization, said companies can apply their IOUs to some or all of their sales and use tax payments, which are due Friday. Most companies report their sales taxes quarterly, so the Friday deadline covers taxes owed for the second calendar quarter. IOUs will also be accepted for the next quarterly payments, due Oct. 31.

If the total amount owed in taxes exceeds the value of the IOU, the IOU can be supplemented with a check, Gore said. The IOU must be endorsed on the reverse side with the phrase "Pay to the order of the State Board of Equalization" and then signed.

The state's other tax collection agency, the Franchise Tax Board, announced last month that it would accept IOUs as payment. Personal and corporate income taxes are paid to the Franchise Tax Board.

Staff reporter Howard Fine can be reached at [e-mail] or at [phone], ext. 227.