BILL ANALYSIS
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|SENATE RULES COMMITTEE | AB 469|
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THIRD READING
Bill No: AB 469
Author: Eng (D), et al
Amended: 8/17/09 in Senate
Vote: 21
SENATE REVENUE & TAXATION COMMITTEE : 5-2, 7/8/09
AYES: Wolk, Alquist, Florez, Padilla, Wiggins
NOES: Walters, Ashburn
NO VOTE RECORDED: Runner
SENATE APPROPRIATIONS COMMITTEE : 8-3, 8/17/09
AYES: Kehoe, Corbett, Hancock, Leno, Oropeza, Price, Wolk,
Yee
NOES: Runner, Walters, Wyland
NO VOTE RECORDED: Cox, Denham
ASSEMBLY FLOOR : 49-30, 5/26/09 - See last page for vote
SUBJECT : Sales and use taxes
SOURCE : Board of Equalization
DIGEST : This bill eliminates the election to report and
pay qualified use
tax (QUT) on an acceptable tax return (return), and
instead, requires any taxpayer who fails to report and pay
QUT pursuant to the Sales and Use Tax Law to report and
remit the QUT on a return.
ANALYSIS :
CONTINUED
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Existing law:
1. Imposes a sales tax on retailers for the privilege of
selling tangible personal property (TPP), absent a
specific exemption. The tax is based upon the gross
receipts from the sale of TPP in this state.
2. Imposes a use tax on the storage, use, or other
consumption in this state of TPP purchased from any
retailer for storage, use, or other consumption in this
state, absent a specific exemption.
3. Authorizes a person to make an irrevocable election to
report QUT on that person's income tax return.
4. Requires the Franchise Tax Board (FTB) to include space
on income tax returns to allow a person to report and
remit QUT to the FTB. The FTB, in turn, is required to
remit the QUT collected to the Board of Equalization
(BOE).
This bill:
1. Provides that, for "one or more single nonbusiness
purchases of individual items" of tangible personal
property (TPP) with a sales price of less than $1,000,
the term QUT means either of the following:
A. The use tax imposed under the Sales and Use Tax
(SUT) Law, the California Constitution, the
Bradley-Burns Uniform Local SUT Law, or the
Transactions and Use Tax Law, that has not been paid
to a retailer holding a seller's permit or
certificate of registration-use tax.
B. The estimated amount of use tax due based on the
person's California adjusted gross income as
reflected in the use tax table shown in the
accompanying instructions of the return.
2. Specifies that, for one or more single nonbusiness
purchases of individual items of TPP with a sales price
of $1,000 or more, or for any TPP purchased for use in a
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trade or business, QUT means the amount of use tax
imposed under the SUT Law, the California Constitution,
the Bradley-Burns Uniform Local SUT Law, or the
Transactions and Use Tax Law, that has not been paid to
a retailer holding a seller's permit or certificate of
registration-use tax.
3. Specifies that QUT does not include use tax imposed on a
purchase of cigarettes, tobacco products, or cigarettes
and tobacco products for which the purchaser is
registered with the BOE as a cigarette consumer, a
tobacco products consumer, or a cigarette and tobacco
products consumer.
4. Provides that a person required to report QUT on a
Return shall report and remit the QUT by reporting the
amount due based on all taxable purchases of TPP made
during the taxable year for which the return is required
to be filed. Provides that a person that has made one or
more single nonbusiness purchases of individual items of
TPP each with a sales price of less than $1,000 may
satisfy his/her tax liability for those purchases by
using the use tax table shown in the accompanying
instructions of the return.
5. Specifies that, with respect to one or more single
nonbusiness purchases of individual items of TPP with a
sales price of less than $1,000, BOE shall be precluded
from making any understatement determination against any
person that uses the use tax table in accordance with
the accompanying instructions.
6. Applies to purchases of TPP made on or after January 1,
2010, in taxable years beginning on or after January 1,
2010.
7. Makes other conforming changes to the Revenue and
Taxation Code.
Prior Legislation
SB 1009 (Alpert), Chapter 718, Statutes of 2003, added the
election for taxpayers to report and pay use tax on their
state income tax returns.
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AB 969 (Eng), 2007-08 Session, would have replaced the
current option for a taxpayer to report use tax on the
state income tax return with a requirement to report use
tax. AB 969 was vetoed by the Governor, who noted his
concern that the bill's effective date was too soon for
taxpayers to compile adequate records of purchases subject
to use tax. He also stated, "I would like to see a plan to
better educate taxpayers on the use tax, as I suspect that
many taxpayers have little knowledge of the tax and may
unknowingly fail to pay it."
AB 1957 (Eng), 2007-08 Session, would have also replaced
the election with a mandatory reporting requirement. The
bill failed in the Senate Revenue and Taxation Committee.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 8/19/09)
Board of Equalization (source)
American Federation of State, County and Municipal
Employees
California Association of School Business Officials
California Immigrant Policy Center
California Labor Federation
California Professional Firefighters
California Rural Legal Assistance Foundation
California School Employees Association
California State Association of Counties
California Public Interest Research Group
California Tax Reform Association
City of Alhambra Fire Department
Cities of San Gabriel and San Marino
Faculty Association of California Community Colleges
League of California Cities
Peace Officers Research Association of California
San Marino Firefighters Association
The Advocacy Respect Commitment of California
United Firefighters of Los Angeles City
ARGUMENTS IN SUPPORT : The author states, "According to
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the BOE, California loses over $1 Billion every year as a
result of unreported use tax from the purchase of
electronic and mail-order goods. By increasing compliance
and capturing a portion of that unreported tax revenue, we
could help prevent the unnecessary elimination or reduction
of core state services, such as education, public
transportation, and assistance for the blind, disabled and
elderly."
BOE, which is sponsoring this bill, states: "While the use
tax law was enacted in 1935, the most costly area of tax
noncompliance consists of purchases made from out-of-state
vendors without payment of use tax - [BOE] has estimated
that California is losing over one billion dollars annually
attributable to these purchases. Closing this tax gap is a
priority of [BOE's], and we believe this measure brings us
one step closer by strengthening the laws applicable to the
reporting of use tax. Instead of having an option to either
report to [BOE] or to [FTB], as the law currently provides,
this measure would require consumers (including businesses
that aren't already registered with [BOE]) to report their
use tax obligations on their [FTB] income tax return, if
they failed to report the tax to [BOE] during the preceding
year. With these changes, we hope that we can achieve a
greater level of compliance from taxpayers, as well as
enhanced cooperation from tax practitioners, by making it
perfectly clear that the use tax is required to be paid on
untaxed purchases made from out-of-state retailers."
ASSEMBLY FLOOR :
AYES: Ammiano, Arambula, Beall, Block, Blumenfield,
Brownley, Buchanan, Caballero, Charles Calderon, Carter,
Chesbro, Coto, Davis, De La Torre, De Leon, Eng, Evans,
Feuer, Fong, Fuentes, Furutani, Galgiani, Hall, Hayashi,
Hernandez, Hill, Huffman, Jones, Krekorian, Lieu, Bonnie
Lowenthal, Ma, Mendoza, Monning, Nava, John A. Perez, V.
Manuel Perez, Portantino, Price, Ruskin, Salas, Saldana,
Skinner, Solorio, Swanson, Torlakson, Torrico, Yamada,
Bass
NOES: Adams, Anderson, Bill Berryhill, Tom Berryhill,
Blakeslee, Conway, Cook, DeVore, Duvall, Emmerson,
Fletcher, Fuller, Gaines, Garrick, Gilmore, Hagman,
Harkey, Huber, Jeffries, Knight, Logue, Miller, Nestande,
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Niello, Nielsen, Silva, Smyth, Audra Strickland, Tran,
Villines
NO VOTE RECORDED: Torres
DLW:mw 8/19/09 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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