BILL NUMBER: SB 1449	CHAPTERED  09/14/06

	CHAPTER  252
	FILED WITH SECRETARY OF STATE  SEPTEMBER 14, 2006
	APPROVED BY GOVERNOR  SEPTEMBER 14, 2006
	PASSED THE SENATE  AUGUST 22, 2006
	PASSED THE ASSEMBLY  AUGUST 17, 2006
	AMENDED IN ASSEMBLY  AUGUST 7, 2006
	AMENDED IN ASSEMBLY  JUNE 26, 2006
	AMENDED IN SENATE  MAY 11, 2006
	AMENDED IN SENATE  MAY 2, 2006

INTRODUCED BY   Senator Migden
   (Principal coauthor: Assembly Member Klehs)

                        FEBRUARY 23, 2006

   An act to add Section 6597 to the Revenue and Taxation Code,
relating to taxation.


	LEGISLATIVE COUNSEL'S DIGEST


   SB 1449, Migden  Sales and use tax fraud.
   The Sales and Use Tax Law imposes penalties for failure to file
returns and for failure to remit the total taxes owed.
   This bill would provide that any person who knowingly collected
sales tax reimbursement or use tax, and who fails to timely remit
that sales tax reimbursement or use tax to the State Board of
Equalization, is liable for a penalty of 40% of the amount not timely
remitted, except under certain circumstances.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  Section 6597 is added to the Revenue and Taxation Code,
to read:
   6597.  (a) (1) Any person who knowingly collects sales tax
reimbursement, as defined in Section 1656.1 of the Civil Code, or who
knowingly collects use tax pursuant to Chapter 3 (commencing with
Section 6201), and who fails to timely remit that sales tax
reimbursement or use tax to the board, shall be liable for a penalty
of 40 percent of the amount not timely remitted.
   (2) (A)  This subdivision shall not apply to any person whose
liability for the unremitted sales tax reimbursement or use tax
described in paragraph (1) averages one thousand dollars ($1,000) or
less per month or does not exceed 5 percent of the total amount of
tax liability for which the tax reimbursement was collected for the
period in which tax was due, whichever is greater.
   (B) If a person's failure to make a timely remittance of sales tax
reimbursement or use tax is due to a reasonable cause or
circumstances beyond the person's control, and occurred
notwithstanding the exercise of ordinary care and the absence of
willful neglect, the person shall be relieved of the penalty imposed
by this subdivision.
   (b) For purposes of this section:
   (1) "Reasonable cause or circumstances beyond the person's control"
includes, but is not limited to, any of the following:
   (A) The occurrence of a death or serious illness of the person or
the person's next of kin that caused the person's failure to make a
timely remittance.
   (B) The occurrence of an emergency, as defined in Section 8558 of
the Government Code that caused the person's failure to make a timely
remittance.
   (C) A natural disaster or other catastrophe directly affecting the
business operations of the person that caused the person's failure
to make a timely remittance.
   (D) The board failed to send returns or other information to the
correct address of record, that caused the person's failure to make a
timely remittance.
   (E) The person's failure to make a timely remittance occurred only
once over a three-year period, or once during the period in which
the person was engaged in business, whichever time period is shorter.

   (F) The person voluntarily corrected errors in remitting sales tax
reimbursement or use tax collected that were made in previous
reporting periods and remitted payment of the liability owed as a
result of those errors prior to being contacted by the board
regarding possible errors or discrepancies.
   (2) "Sales tax reimbursement" shall also include any sales tax
that is advertised, held out, or stated to the public or to any
customer, directly or indirectly, that the tax or any part thereof
will be assumed or absorbed by the retailer.
   (c) This section shall apply to any determination made by the
board pursuant to Article 2 (commencing with Section 6481), Article 3
(commencing with Section 6511), and Article 4 (commencing with
Section 6536).