BILL ANALYSIS
AB 1265
Page 1
ASSEMBLY THIRD READING
AB 1265 (Ma)
As Amended June 1, 2009
Majority vote. Tax levy
REVENUE & TAXATION 9-0 APPROPRIATIONS 17-0
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|Ayes:|Charles Calderon, DeVore, |Ayes:|De Leon, Nielsen, |
| |Beall, Coto, Harkey, Ma, | |Ammiano, |
| |Nielsen, Portantino, Fong | |Charles Calderon, Davis, |
| | | |Duvall, Fuentes, Hall, |
| | | |Harkey, Miller, |
| | | |John A. Perez, Price, |
| | | |Skinner, Solorio, Audra |
| | | |Strickland, Torlakson, |
| | | |Krekorian |
|-----+--------------------------+-----+--------------------------|
| | | | |
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SUMMARY : Provides that, until January 1, 2012, a "qualified
itinerant vendor" (QIV) is a consumer, and not a retailer, of
tangible personal property (TPP) that the QIV owns and sells for
less than $100, except alcoholic beverages. Specifically, this
bill :
1) Provides that a person is a QIV when all of the
following apply:
a) The person was a member of the United States Armed
Forces, who received an honorable discharge or a release
from active duty under honorable conditions;
b) The person is unable to obtain a livelihood by manual
labor due to a service-connected disability;
c) For the purposes of selling TPP, the person is a sole
proprietor with no employees; and,
d) The person has no "permanent place of business" in this
state.
AB 1265
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2) Defines "permanent place of business" as "any building
or other permanently affixed structure, including a
residence, that is used in whole or in part for the purpose
of making sales of, or taking orders and arranging for
shipment of, [TPP]." Provides that a permanent place of
business does not include any building or other permanently
affixed structure, including a residence, used for any of
the following:
a) The storage of TPP; and,
b) The cleaning or storage of equipment or other property
used in connection with the manufacture or sale of TPP.
3) Provides that the preferential classification shall not
apply to a person:
a) Engaged in the business of serving meals, food, or
drinks to a customer at a location owned, rented, or
otherwise supplied by the customer (i.e., a caterer); or,
b) Operating a vending machine.
4) Applies to retail sales of TPP worth less than $100.
5) Takes immediate effect as a tax levy, but becomes
operative on the first day of the first calendar quarter
beginning more than 90 days after its effective date.
6) Specifies that the state will not reimburse any local
agency for any sales or use tax (SUT) revenues lost by the
agency under this bill.
EXISTING LAW :
AB 1265
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1)Imposes a sales tax on retailers for the privilege of selling
TPP, absent a specific exemption. The tax is based upon the
gross receipts from sales 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)Designates the following entities as consumers, and not
retailers, of specified TPP they use or furnish in the
performance of their professional services:
a) Licensed optometrists, physicians, pharmacists, and
registered dispensing opticians;
b) Licensed veterinarians;
c) Licensed chiropractors;
d) Specified garment cleaning establishments that received
no more than 20% of their total gross receipts from the
alteration of garments during the preceding calendar year;
e) Licensed hearing aid dispensers; and,
f) Producers of X-ray films or photographs used to diagnose
human medical or dental conditions.
FISCAL EFFECT : The Board of Equalization (BOE) estimates that
this bill would reduce state and local revenues by $24,000
annually.
COMMENTS : The author states:
AB 1265 represents one small step towards recognizing
our disabled veterans who have already made, or are
making the transition from military to civilian
employment. Enactment of this bill would assist in
this transition in two ways: (1) by making the law
specific with regard to sales tax obligations of
qualifying disabled veterans, and (2) by simplifying
reporting requirements that can be unduly burdensome
AB 1265
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for these small businesses.
By placing qualifying itinerant veterans in the
'consumer' status for sales and use tax purposes, the
veterans would not be required to obtain a seller's
permit, file sales tax returns, or remit sales tax on
[their] sales . . . . Instead, the veterans would
simply pay tax up front on their purchases of the goods
they intend to sell.
Committee Staff Notes:
1) What is "consumer" status? "Consumer" reporting status
is conferred on specified entities to alleviate the burden
of registering with BOE as a retailer of TPP. At the same
time, consumer status minimizes the revenue losses often
associated with outright exemptions from tax. As noted
above, consumer status has been conferred on a wide range
of entities, including optometrists, veterinarians,
licensed hearing aid dispensers, and others with respect to
certain TPP sales.
2) How did we get here? For several years, certain
veterans have argued that Business and Professions Code
(B&PC) Section 16102 exempts honorably discharged veterans
from sales tax on sales of food and carbonated beverages
from a mobile cart. B&PC Section 16102 provides in its
entirety: "Every soldier, sailor or marine of the United
States who has received an honorable discharge or a release
from active duty under honorable conditions from such
service may hawk, peddle and vend any goods, wares or
merchandise owned by him, except spirituous, malt, vinous
or other intoxicating liquor, without payment of any
license, tax or fee whatsoever, whether municipal, county
or State, and the board of supervisors shall issue to such
soldier, sailor or marine, without cost, a license
therefore."
3) This provision was enacted in 1893 [long before
enactment of the SUT Law], and was described in the
chaptered bill as "An act to establish a uniform system of
county and township government." Moreover, this statute is
AB 1265
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contained in Chapter 2 of Part 1 of Division 7 of the B&PC,
entitled Licensing by Counties. As such, BOE has taken the
position that this statute exempts honorably discharged
veterans from locally imposed license taxes and fees, and
does not provide an exemption from SUT. BOE notes that its
determination was challenged unsuccessfully in Los Angeles
County Superior Court, and is consistent with two opinions
provided by the Office of Legislative Counsel.
4) This bill seeks to address the issue by explicitly
granting preferential treatment to honorably discharged
itinerant veterans under the SUT Law. It should be noted
that this bill is similar to AB 3009 (Brownley) of the
2007-08 legislative session, which would have conferred
consumer status to similarly situated QIVs, but only with
respect to food products and nonalcoholic beverages. AB
3009 was held in this Committee.
5) Committee staff note the following related bills also
introduced in the current legislative session:
a) AB 659 (Hayashi): Provides that specified garment
cleaning businesses shall be regarded as consumers, rather
than retailers, of TPP they sell, provided those sales do
not exceed 0.5% of their total gross receipts for the
preceding calendar year. AB 659 (Hayashi) passed out of
the Assembly Appropriations Committee on Consent;
b) AB 676 (Jeffries): Designates a qualified destination
management company as a consumer, and not a retailer, of
the TPP it provides a client under a qualified contract for
destination management services. AB 676 (Jeffries) was
held in Assembly Appropriations Committee;
c) AB 1486 (Furutani): Provides that specified tax-exempt
organizations shall be deemed consumers, rather than
retailers, with respect to certain transfers of TPP to
their members. AB 1486 (Furutani) passed out of the
Assembly Appropriations Committee on Consent; and,
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d) SB 809 (Veteran Affairs Committee): Contains provisions
identical to this bill, except that SB 809 also provides
that the state shall not reimburse local agencies for lost
sales and use tax revenues. SB 809 passed out of the
Senate Revenue and Taxation Committee on May 13, 2009 with
a vote of 7-0.
Analysis Prepared by : M. David Ruff / REV. & TAX. / (916)
319-2098
FN: 0001170